Question 3 (5 parts): Two stocks, X and Y, have expected returns ux = 9% and uy = 7% and with standard deviat ox = 3.5% and oy = 2.5% for those returns. The covariance of the two stock's returns Cov(X, -0.0006. a. What is the correlation, e, of the returns of stocks X and Y? b. What are the expected return and standard deviation of a portfolio which is 25% stock X (the remainder is stock Y)? c. What are the expected return and standard deviation of a portfolio which is 50% stock X (the remainder stock Y)? d. What are the expected return and standard deviation of a portfolio which is 75% stock X (the remainder is stock Y)? e. Which of the portfolios above, either (b), (c), or (d), offers the best combination of risk and return? Briefly explain.
Question 3 (5 parts): Two stocks, X and Y, have expected returns ux = 9% and uy = 7% and with standard deviat ox = 3.5% and oy = 2.5% for those returns. The covariance of the two stock's returns Cov(X, -0.0006. a. What is the correlation, e, of the returns of stocks X and Y? b. What are the expected return and standard deviation of a portfolio which is 25% stock X (the remainder is stock Y)? c. What are the expected return and standard deviation of a portfolio which is 50% stock X (the remainder stock Y)? d. What are the expected return and standard deviation of a portfolio which is 75% stock X (the remainder is stock Y)? e. Which of the portfolios above, either (b), (c), or (d), offers the best combination of risk and return? Briefly explain.
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter1: Functions
Section1.EA: Extended Application Using Extrapolation To Predict Life Expectancy
Problem 5EA
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