Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .086, E(RB) = .146, ÏA = .356, and ÏB = .616.
a-1. Calculate the expected return of a portfolio that is composed of 31 percent Stock A and 69 percent Stock B when the correlation between the returns on A and B is .46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return %
a-2. Calculate the standard deviation of a portfolio that is composed of 31 percent Stock A and 69 percent Stock B when the correlation between the returns on A and B is .46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Standard deviation %
b. Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on Stocks A and B is â.46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Standard deviation %
| Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .086, E(RB) = .146, ÏA = .356, and ÏB = .616. |
| a-1. | Calculate the expected return of a portfolio that is composed of 31 percent Stock A and 69 percent Stock B when the correlation between the returns on A and B is .46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Expected return | % |
| a-2. | Calculate the standard deviation of a portfolio that is composed of 31 percent Stock A and 69 percent Stock B when the correlation between the returns on A and B is .46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | % |
| b. | Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on Stocks A and B is â.46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | % |
Related questions
| Based on the following information: |
| State of Economy | Probability of State of Economy | Return on Stock J | Return on Stock K |
| Bear | .23 | â.013 | .041 |
| Normal | .58 | .145 | .069 |
| Bull | .19 | .225 | .099 |
| Calculate the expected return for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Expected return | |
| Stock J | % |
| Stock K | % |
| Calculate the standard deviation for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | |
| Stock J | % |
| Stock K | % |
| What is the covariance between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) |
| Covariance |
| What is the correlation between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) |
| Correlation | |
| Security F has an expected return of 11.70 percent and a standard deviation of 44.70 percent per year. Security G has an expected return of 16.70 percent and a standard deviation of 63.70 percent per year. |
| a. | What is the expected return on a portfolio composed of 23 percent of Security F and 77 percent of Security G? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Expected return | % |
| b. | If the correlation between the returns of Security F and Security G is .18, what is the standard deviation of the portfolio described in part (a)? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Standard deviation | % |
