1. The following table presents the expected returns of three stocks and the risk free rate. Stock A B 4% Expected return What is the expected return and risk on an equally weighted portfolio composed of these four assets? The standard deviation of stock A is 10% and the covariance between A and B equals 0.0045. The correlation matrix between A, B and Cis: 8% 14% 4% Correl A В A 0.3 0.7 0.3 0.7 B 1 0.5 0.5 Combining stocks A and C in a portfolio in equal proportions will result in a variance of1.95%. 1
1. The following table presents the expected returns of three stocks and the risk free rate. Stock A B 4% Expected return What is the expected return and risk on an equally weighted portfolio composed of these four assets? The standard deviation of stock A is 10% and the covariance between A and B equals 0.0045. The correlation matrix between A, B and Cis: 8% 14% 4% Correl A В A 0.3 0.7 0.3 0.7 B 1 0.5 0.5 Combining stocks A and C in a portfolio in equal proportions will result in a variance of1.95%. 1
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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