Exercise 6: a. Calculate the rate of return and standard deviation for the portfolio composed of 20% of the stocks A and 80% of the stocks B with the following characteristics: RA-10%, RB-20%, Sigma A=15%, Sigma B=30%, Correlation Coefficient =0.5. b. Assuming the short sale is possible, find the share of the stocks A and B in a portfolio D having an expected rate of return of 5%.

Exercise 6: a. Calculate the rate of return and standard deviation for the portfolio composed of 20% of the stocks A and 80% of the stocks B with the following characteristics: RA-10%, RB-20%, Sigma A=15%, Sigma B=30%, Correlation Coefficient =0.5. b. Assuming the short sale is possible, find the share of the stocks A and B in a portfolio D having an expected rate of return of 5%.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 9PROB

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Question

Exercise 6:
a.
Calculate the rate of return and standard deviation for the portfolio composed of 20% of
the stocks A and 80% of the stocks B with the following
characteristics: RA=10%, RB-20%, Sigma A=15%, Sigma B=30%, Correlation
Coefficient =0.5.
b. Assuming the short sale is possible, find the share of the stocks A and B in a portfolio D
having an expected rate of return of 5%.

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