The yield of stock A will be 0.30 with 40% probability and 0.50 with 60% probability. Stock B has a return of 0.4 and a standard deviation of 0.02. The covariance coefficient between these two stocks is 0.4. In such a

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The yield of stock A will be 0.30 with 40%
probability and 0.50 with 60% probability.
Stock B has a return of 0.4 and a standard
deviation of 0.02. The covariance coefficient
between these two stocks is 0.4. In such a
case, calculate the return and risk of the
portfolio weighted so that A share is 3 times B
stock.
Transcribed Image Text:The yield of stock A will be 0.30 with 40% probability and 0.50 with 60% probability. Stock B has a return of 0.4 and a standard deviation of 0.02. The covariance coefficient between these two stocks is 0.4. In such a case, calculate the return and risk of the portfolio weighted so that A share is 3 times B stock.
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