QUESTION 9 Stock X has a standard deviation of 25 percent per year and stock Y has a standard deviation of 16 percent per year. The correlation between Stock X and Stock Y is zero. You have a portfolio of these two stocks wherein Stock X has a portfolio weight of 50 percent. What is your portfolio standard deviation? Use the portfolio variance formula TIPS: Min WB = 0²A-(0A x 0B PAB)[(02A + o2B)] -2(0A OB PAB) Since, PAB is zero, the above equation reduces to Minimum variance WB-02A/0²A+ PAB) 1-WB-weight -WA Use Portfolio variance after this point. COA 2.2% OB. 11.76% OC 14.84% OD None

QUESTION 9 Stock X has a standard deviation of 25 percent per year and stock Y has a standard deviation of 16 percent per year. The correlation between Stock X and Stock Y is zero. You have a portfolio of these two stocks wherein Stock X has a portfolio weight of 50 percent. What is your portfolio standard deviation? Use the portfolio variance formula TIPS: Min WB = 0²A-(0A x 0B PAB)[(02A + o2B)] -2(0A OB PAB) Since, PAB is zero, the above equation reduces to Minimum variance WB-02A/0²A+ PAB) 1-WB-weight -WA Use Portfolio variance after this point. COA 2.2% OB. 11.76% OC 14.84% OD None

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 13P

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