From the following information, calculate covariance between stocks A and B and expected return and risk of a portfolio in which A and B are equally weighted. Which stock would be recommend if investment in individual stock is to be made? Justify  answer using numerical calculations.   Stock A Stock B Expected return 24% 35% Standard deviation 12% 18% Coefficient of correlation 0.65        0.65

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
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From the following information, calculate covariance between stocks A and B and expected return and risk of a portfolio in which A and B are equally weighted.

Which stock would be recommend if investment in individual stock is to be made? Justify  answer using numerical calculations.

 

Stock A

Stock B

Expected return

24%

35%

Standard deviation

12%

18%

Coefficient of correlation

0.65       

0.65
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