EBK FUNDAMENTALS OF CORPORATE FINANCE
EBK FUNDAMENTALS OF CORPORATE FINANCE
3rd Edition
ISBN: 9780133762808
Author: Harford
Publisher: PEARSON CUSTOM PUB.(CONSIGNMENT)
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Chapter 12, Problem 11P

Using the spreadsheet from Problem Il and the fact that Cola Co. and Gas Co. have a correlation of 0.6083, calculate the volatility (standard deviation) of a portfolio thatis 55% invested in Cola co. stock and 45% invested in Gas Co. stock. Calculate the volatility by

a. Using Eq. 12.4.
b. Calculating the monthly returns of the portfolio and computing its volatility directly.
c. How do your results compare?

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EBK FUNDAMENTALS OF CORPORATE FINANCE

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