Two common stocks, Consolidated Edison and Apple, havethe following expected return and standard deviation ofreturn over the next year:Common stock Expected rate of return Standard deviationConsolidated Edison12%6%Apple20%15%Additionally, assume that the correlation coefficient ofreturns on the two securities is +0.50. For a portfolioconsisting of 75 percent of the funds invested inConsolidated Edison and the remainder in Apple, determinethe following:41-45) Expected rate of return on the portfolio46-50) Standard deviation of the rate of return

Two common stocks, Consolidated Edison and Apple, have the following expected return and standard deviation of return over the next year: Common stock Expected rate of return Standard deviation Consolidated Edison 12% 6% Apple 20% 15%

Two common stocks, Consolidated Edison and Apple, have the following expected return and standard deviation of return over the next year: Common stock Expected rate of return Standard deviation Consolidated Edison 12% 6% Apple 20% 15%

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

Section: Chapter Questions

Problem 1PS

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Question

Two common stocks, Consolidated Edison and Apple, have
the following expected return and standard deviation of
return over the next year:
Common stock Expected rate of return Standard deviation
Consolidated Edison
12%
6%
Apple
20%
15%
Additionally, assume that the correlation coefficient of
returns on the two securities is +0.50. For a portfolio
consisting of 75 percent of the funds invested in
Consolidated Edison and the remainder in Apple, determine
the following:
41-45) Expected rate of return on the portfolio
46-50) Standard deviation of the rate of return

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