Suppose the expected returns and standard deviations of, Ask an Expert

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Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .094, E(RB) = .154, sA = .364, and sB = .624.

a-1. Calculate the expected return of a portfolio that is composed of 39 percent Stock A and 61 percent Stock B when the correlation between the returns on A and B is .54. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return %

a-2. Calculate the standard deviation of a portfolio that is composed of 39 percent Stock A and 61 percent Stock B when the correlation between the returns on A and B is .54. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation %

b. Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on Stocks A and B is -.54. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation %

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92843143

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