https://d.pr/i/d79jej
Assume that your uncle holds just one stock, East Coast Bank(ECB), which he thinks has very little risk. You agree that thestock is relatively safe, but you want to demonstrate that his riskwould be even lower if he were more diversified. You obtain thefollowing returns data for West Coast Bank (WCB). Both banks havehad less variability than most other stocks over the past 5 years.Measured by the standard deviation of returns, by how much wouldyour uncle's risk have been reduced if he had held a portfolioconsisting of 46% in ECB and the remainder in WCB? (Hint: Use thesample standard deviation formula.)
Year ECB WCB
2004 40.00% 40.00%
2005 Â10.00% 15.00%
2006 35.00% Â5.00%
2007 Â5.00% Â10.00%
2008 15.00% 35.00%
https://d.pr/i/d79jej
Average return = 15.00% 15.00%
Standard deviation = 22.64% 22.64%
https://d.pr/i/d79jej
Assume that your uncle holds just one stock, East Coast Bank(ECB), which he thinks has very little risk. You agree that thestock is relatively safe, but you want to demonstrate that his riskwould be even lower if he were more diversified. You obtain thefollowing returns data for West Coast Bank (WCB). Both banks havehad less variability than most other stocks over the past 5 years.Measured by the standard deviation of returns, by how much wouldyour uncle's risk have been reduced if he had held a portfolioconsisting of 46% in ECB and the remainder in WCB? (Hint: Use thesample standard deviation formula.)
Year ECB WCB
2004 40.00% 40.00%
2005 Â10.00% 15.00%
2006 35.00% Â5.00%
2007 Â5.00% Â10.00%
2008 15.00% 35.00%
https://d.pr/i/d79jej
Average return = 15.00% 15.00%
Standard deviation = 22.64% 22.64%
