You have a portfolio of investment which consists of Stock A with a return of A% and Stock B with a return of B%. Given the following average- returns and standard deviations for both Stock A and Stock B, M(A) = 12%, M(B) = 40% S(A) = 2%, s(B) = 11% what is the absolute risk (standard deviation) of your portfolo assuming that the returns of Stock A and Stock B are uncorrelated? Hint: Notice that the return of your portfollo will be A+B and the Variance Sum Laws apply to the variances not standard deviations. Answer should be in % accurate up to 2 decimal places.
You have a portfolio of investment which consists of Stock A with a return of A% and Stock B with a return of B%. Given the following average- returns and standard deviations for both Stock A and Stock B, M(A) = 12%, M(B) = 40% S(A) = 2%, s(B) = 11% what is the absolute risk (standard deviation) of your portfolo assuming that the returns of Stock A and Stock B are uncorrelated? Hint: Notice that the return of your portfollo will be A+B and the Variance Sum Laws apply to the variances not standard deviations. Answer should be in % accurate up to 2 decimal places.
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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Transcribed Image Text:QUESTION 10
You have a portfolio of investment which consists of Stock A with a return of A% and Stock B with a return of B%. Given the following average
returns and standard deviations for both Stock A and Stock B,
M(A) = 12%, M(B) = 40%
S(A) = 2%, s(B) = 11%
what is the absolute risk (standard deviation) of your portfolio assuming that the returns of Stock A and Stock B are uncorrelated?
Hint: Notice that the return of your portfollo will be A+B and the Varlance Sum Laws apply to the varlances not standard devlations.
Answer should be in % accurate up to 2 decimal places.
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