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A portfolio is invested 40 percent in Stock G and 60 percent in Stock J. The expected returns on these stocks are 10 percent and 15 percent respectively. The standard deviations of these stocks are 10% and 18% and the correlation coefficient between the two stocks is 0.25.

What is the portfolio’s expected risk? Show detailed calculations

Is there any benefit of combining the two stocks? Or will individual stocks provide better risk adjusted returns?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91559415

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