A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65. The expected returns and standard deviations of the two stocks are given in the following table a. What is the expected return of the hedge fund's portfolio? b. What is the standard deviation of the hedge fund's portfolio? a. What is the expected return of the hedge fund's portfolio? The expected return of the hedge fund's portfolio is%. (Round to two decimal places.)

A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65. The expected returns and standard deviations of the two stocks are given in the following table a. What is the expected return of the hedge fund's portfolio? b. What is the standard deviation of the hedge fund's portfolio? a. What is the expected return of the hedge fund's portfolio? The expected return of the hedge fund's portfolio is%. (Round to two decimal places.)

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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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 9%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 19% 12 Standard Deviation 32% 15 The correlation between the fund returns is 0.11. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places. Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation
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