J&J has expected returns of 7% with a standard deviation of 10%. The W company has expected returns of 16% with a standard deviations of 20%. The correlation of returns between these two companies is 22% (same as 7 above). Now calculate the expected return and standard deviation of a portfolio that consist of a long position of £10,000 in J&J and a short position of £2,000 in W?
J&J has expected returns of 7% with a standard deviation of 10%. The W company has expected returns of 16% with a standard deviations of 20%. The correlation of returns between these two companies is 22% (same as 7 above). Now calculate the expected return and standard deviation of a portfolio that consist of a long position of £10,000 in J&J and a short position of £2,000 in W?
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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Transcribed Image Text:8) J&J has expected returns of 7% with a standard deviation of 10%. The W company has
expected returns of 16% with a standard deviations of 20%. The correlation of returns
between these two companies is 22% (same as 7 above). Now calculate the expected
return and standard deviation of a portfolio that consist of a long position of £10,000 in
J&J and a short position of £2,000 in W?
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