Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter17: Making Decisions With Uncertainty
Section: Chapter Questions
Problem 17.1IP
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Question
Q5 - Summary statistics for returns on two stocks X and Y are listed below.
Mean Variance
Stock X 2.85% 0.005000
Stock Y 5.91% 0.006000
The covariance of returns on stocks X and Y is 0.002800. Consider a portfolio of 30% stock X and 70% stock Y.
What is the variance of portfolio returns?
Please round your answer to six decimal places.
Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.
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