A portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below. STOCK X EXPECTED RETURn 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% d. Is your portfolio less risky or more risky than the market? Explain. e. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why?
A portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below. STOCK X EXPECTED RETURn 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% d. Is your portfolio less risky or more risky than the market? Explain. e. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why?
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.
| STOCK X EXPECTED RETURn | 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% |
d. Is your portfolio less risky or more risky than the market? Explain.
e. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why?
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