Maria has a portfolio consisting of 7 shares of stock A (purchased for $70 per share) and 4 shares of stock B (purchased for $100 per share). She assumes the expected rates of returns after 1 year will be 0.02 for stock A and 0.15 for stock B, with variances of 0.04 and 0.18, respectively. The expected rate of return after 1 year for Maria's portfolio is 0.0784 intermediate calculations.) 0.0784 Complete the table below by computing the standard deviation 0.2600 turns after 1 year on the portfolio if the stocks' returns have a coefficient of correlation of -0.4, are uncorrelated, and are perfectly correlat Coefficient of Correlation Betweenthe Returns of Stock A and B (p) p = -0.4 p = 0.0 P = 1.0 0.0850 . (Hint: For best results, retain at least four decimal places for any 0.1100 Standard Deviation or Return [VV(R₂)]
Maria has a portfolio consisting of 7 shares of stock A (purchased for $70 per share) and 4 shares of stock B (purchased for $100 per share). She assumes the expected rates of returns after 1 year will be 0.02 for stock A and 0.15 for stock B, with variances of 0.04 and 0.18, respectively. The expected rate of return after 1 year for Maria's portfolio is 0.0784 intermediate calculations.) 0.0784 Complete the table below by computing the standard deviation 0.2600 turns after 1 year on the portfolio if the stocks' returns have a coefficient of correlation of -0.4, are uncorrelated, and are perfectly correlat Coefficient of Correlation Betweenthe Returns of Stock A and B (p) p = -0.4 p = 0.0 P = 1.0 0.0850 . (Hint: For best results, retain at least four decimal places for any 0.1100 Standard Deviation or Return [VV(R₂)]
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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![Maria has a portfolio consisting of 7 shares of stock A (purchased for $70 per share) and 4 shares of stock B (purchased for $100 per share). She assumes the expected rates of returns after 1 year will be 0.02 for stock A and 0.15 for stock B, with variances of 0.04 and 0.18, respectively.
The expected rate of return after 1 year for Maria’s portfolio is **0.0784**. (Hint: For best results, retain at least four decimal places for any intermediate calculations.)
Complete the table below by computing the standard deviation of returns after 1 year on the portfolio if the stocks’ returns have a coefficient of correlation of -0.4, are uncorrelated, and are perfectly correlated.
| Coefficient of Correlation Between the Returns of Stock A and B (ρ) | Standard Deviation of Return [√V(Rₚ)] |
| ------------------------------------------------------------------- | ------------------------------------- |
| ρ = -0.4 | 0.0784 |
| ρ = 0.0 | 0.2600 |
| ρ = 1.0 | 0.0850 |
In this scenario, the standard deviation of returns changes depending on the correlation between stocks A and B. The table provides values for three cases of correlation: negatively correlated (ρ = -0.4), uncorrelated (ρ = 0.0), and perfectly correlated (ρ = 1.0).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F38728de7-0a13-478e-98cf-f10fd3e7b113%2F383ad793-f745-45fb-b6ed-b70114d5c472%2Ftmhsbe_processed.png&w=3840&q=75)
Transcribed Image Text:Maria has a portfolio consisting of 7 shares of stock A (purchased for $70 per share) and 4 shares of stock B (purchased for $100 per share). She assumes the expected rates of returns after 1 year will be 0.02 for stock A and 0.15 for stock B, with variances of 0.04 and 0.18, respectively.
The expected rate of return after 1 year for Maria’s portfolio is **0.0784**. (Hint: For best results, retain at least four decimal places for any intermediate calculations.)
Complete the table below by computing the standard deviation of returns after 1 year on the portfolio if the stocks’ returns have a coefficient of correlation of -0.4, are uncorrelated, and are perfectly correlated.
| Coefficient of Correlation Between the Returns of Stock A and B (ρ) | Standard Deviation of Return [√V(Rₚ)] |
| ------------------------------------------------------------------- | ------------------------------------- |
| ρ = -0.4 | 0.0784 |
| ρ = 0.0 | 0.2600 |
| ρ = 1.0 | 0.0850 |
In this scenario, the standard deviation of returns changes depending on the correlation between stocks A and B. The table provides values for three cases of correlation: negatively correlated (ρ = -0.4), uncorrelated (ρ = 0.0), and perfectly correlated (ρ = 1.0).
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