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1.) The expected return on Bob’s stock portfolio is  _______  . 2.) Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (ρ = 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio’s standard deviation (σpσp) most likely is  _______  (equal to, less than, or more than) 28%

1.) The expected return on Bob’s stock portfolio is  _______  . 2.) Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (ρ = 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio’s standard deviation (σpσp) most likely is  _______  (equal to, less than, or more than) 28%

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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1.) The expected return on Bob’s stock portfolio is  _______  .

2.) Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (ρ = 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio’s standard deviation (σpσp) most likely is  _______  (equal to, less than, or more than) 28%

A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of finance. Just like standalone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the expected rate of return. Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case: Bob is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: | Stock | Percentage of Portfolio | Expected Return | Standard Deviation | |-------------------|-------------------------|-----------------|-------------------| | Artemis Inc. | 20% | 6.00% | 23.00% | | Babish & Co. | 30% | 14.00% | 27.00% | | Cornell Industries| 35% | 12.00% | 30.00% | | Danforth Motors | 15% | 5.00% | 32.00% | The expected return on Bob’s stock portfolio is ________________ . Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (ρ = 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio’s standard deviation (σₚ) most likely is ________________ 28%.
Transcribed Image Text:A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of finance. Just like standalone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the expected rate of return. Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case: Bob is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: | Stock | Percentage of Portfolio | Expected Return | Standard Deviation | |-------------------|-------------------------|-----------------|-------------------| | Artemis Inc. | 20% | 6.00% | 23.00% | | Babish & Co. | 30% | 14.00% | 27.00% | | Cornell Industries| 35% | 12.00% | 30.00% | | Danforth Motors | 15% | 5.00% | 32.00% | The expected return on Bob’s stock portfolio is ________________ . Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (ρ = 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 28%, the portfolio’s standard deviation (σₚ) most likely is ________________ 28%.
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