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John is an investor. His portfolio primarily tracks the standard and poor 500 (S & P 500) and John wants to add the stock of ABC corp. Before adding the stock to his portfolio, he wants to assess the directional relationship between the stock and the S & P 500. John does not want to increase the unsystematic risk of his portfolio. Thus he is not interested in owning securities in the portfolio that tends to move in the same direction. The prices obtained are summarized in the table that follows:Required: Calculate the covariance of John’s stocks. State the implication of the outcome in project management decisions

John is an investor. His portfolio primarily tracks the standard and poor 500 (S & P 500) and John wants to add the stock of ABC corp. Before adding the stock to his portfolio, he wants to assess the directional relationship between the stock and the S & P 500. John does not want to increase the unsystematic risk of his portfolio. Thus he is not interested in owning securities in the portfolio that tends to move in the same direction. The prices obtained are summarized in the table that follows:Required: Calculate the covariance of John’s stocks. State the implication of the outcome in project management decisions

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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John is an investor. His portfolio primarily tracks the standard and poor 500 (S & P 500) and John wants to add the stock of ABC corp. Before adding the stock to his portfolio, he wants to assess the directional relationship between the stock and the S & P 500. John does not want to increase the unsystematic risk of his portfolio. Thus he is not interested in owning securities in the portfolio that tends to move in the same direction. The prices obtained are summarized in the table that follows:Required: Calculate the covariance of John’s stocks. State the implication of the outcome in project management decisions 

 
Year 2013 2014 2015 2016 2017 S&P 500 1692 1978 1884 2151 2519 ABC CORPORATION. 68 102 110 112 154
Transcribed Image Text:Year 2013 2014 2015 2016 2017 S&P 500 1692 1978 1884 2151 2519 ABC CORPORATION. 68 102 110 112 154
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