Arbor Systems and Gencore stocks both have a volatility of 37%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) + 1.00, (b) 0.50, (c) 0.00, (d) – 0.50, and (e) - 1.00. In which of thecases is the volatility lower than that of the original stocks?If the correlation is + 1.00, the volatility of the portfolio is %. (Round to one decimal place.)If the correlation is 0.50, the volatility of the portfolio is %. (Round to one decimal place.)If the correlation is 0.00, the volatility of the portfolio is%. (Round to one decimal place.)If the correlation is - 0.50, the volatility of the portfolio is%. (Round to one decimal place.)If the correlation is - 1.00, the volatility of the portfolio is %. (Round to one decimal place.)In which of the cases is the volatility lower than that of the original stocks? (Select the best choice below.)A. In all of the cases.B. In cases (b), (c), (d) and (e).C. In none of the cases.O D. In cases (d) and (e).

Stock Volatility is the fluctuation in the prices of the stock on either upside or downside.

In which of the cases is the volatility lower than that of the original stocks? (Select the best choice below.) O A. In all of the cases. O B. In cases (b), (c), (d) and (e). OC. In none of the cases. OD. In cases (d) and (e).

In which of the cases is the volatility lower than that of the original stocks? (Select the best choice below.) O A. In all of the cases. O B. In cases (b), (c), (d) and (e). OC. In none of the cases. OD. In cases (d) and (e).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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Arbor Systems and Gencore stocks both have a volatility of 44%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) +1.00, (b) 0.50, (c) 0.00, (d) - 0.50, and (e) - 1.00. In which of the cases is the volatility lower than that of the original stocks? If the correlation is +1.00, the volatility of the portfolio is%. (Round to two decimal place.)
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