You invest one-third of your wealth in each of three stocks, Ask an Expert

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You invest one-third of your wealth in each of three stocks. The expected return and standard deviation of each individual stock is 10 percent and 20 percent, respectively. Each stock has a pairwise correlation of 0.50 with the returns of the two other stocks. a. What is the expected return of the portfolio? b. What is the risk reduction of investing in the portfolio containing the three stocks relative to investing in only one stock?

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Financial Management, Finance

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