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
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
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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