Ebenezer Scrooge has invested 50% of his money in share A and the remainder in share B. He assesses their prospects as follows: A B Expected return (%) 15 21 Standard deviation (%) 22 24 Correlation between returns 0.6 a. What are the expected return and standard deviation of returns on his portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. How would your answer change if the correlation coefficient were 0 or –0.60? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Ebenezer Scrooge has invested 50% of his money in share A and the remainder in share B. He assesses their prospects as follows: A B Expected return (%) 15 21 Standard deviation (%) 22 24 Correlation between returns 0.6 a. What are the expected return and standard deviation of returns on his portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. How would your answer change if the correlation coefficient were 0 or –0.60? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 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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Ebenezer Scrooge has invested 50% of his money in share A and the remainder in share B. He assesses their prospects as follows:
| A | B | ||
| Expected return (%) | 15 | 21 | |
| Standard deviation (%) | 22 | 24 | |
| Correlation between returns | 0.6 | ||
a. What are the expected return and standard deviation of returns on his portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
b. How would your answer change if the correlation coefficient were 0 or –0.60? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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