A portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below. Calculate the expected return of the portfolio Calculate the standard deviation of the portfolio. Calculate the beta of the portfolio Is your portfolio less risky or more risky than the market? Explain. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why? STOCK X EXPECTED RETUR 10% STOCK X STANDARD DEVIATION 30% STOCK Y EXPECTED RETURN 14% STOCK Y STANDARD DEVIATION 40% CORRELATION BETWEEN X AND Y 0.30 STOCK X BETA 0.90 STOCK Y BETA 0.85 %PORTFOLIO IN X 40% %PORTFOLIO Y 60%
A portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below. Calculate the expected return of the portfolio Calculate the standard deviation of the portfolio. Calculate the beta of the portfolio Is your portfolio less risky or more risky than the market? Explain. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why? STOCK X EXPECTED RETUR 10% STOCK X STANDARD DEVIATION 30% STOCK Y EXPECTED RETURN 14% STOCK Y STANDARD DEVIATION 40% CORRELATION BETWEEN X AND Y 0.30 STOCK X BETA 0.90 STOCK Y BETA 0.85 %PORTFOLIO IN X 40% %PORTFOLIO Y 60%
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 portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below.
Calculate the expected return of the portfolio
Calculate the standard deviation of the portfolio.
Calculate the beta of the portfolio
Is your portfolio less risky or more risky than the market? Explain.
Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why?
| STOCK X EXPECTED RETUR | 10% | ||
| STOCK X STANDARD DEVIATION | 30% | ||
| STOCK Y EXPECTED RETURN | 14% | ||
| STOCK Y STANDARD DEVIATION | 40% | ||
| CORRELATION BETWEEN X AND Y | 0.30 | ||
| STOCK X BETA | 0.90 | ||
| STOCK Y BETA |
0.85 |
||
| %PORTFOLIO IN X | 40% | ||
| %PORTFOLIO Y | 60% |
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