Question

Stocks A and B have the following​ returns:

	Stock A	Stock B
1	0.11	0.05
2	0.04	0.04
3	0.14	0.05
4	-0.05	0.03
5	0.08	-0.02

c. If their correlation is 0.48​, what is the expected return and standard deviation of a portfolio of 79 ​% stock A and 21​% stock​ B? ​(Round to four decimal​ places.)

Answer 1

А I Square of deviation B H Deviation from mean 0.0200 0.0100 0.0200 0.0000 -0.0500 0.0004 0.0001 0.0004 0.0025 D61 X ✓ for =(B58^2*B53+C58^2*G53+2*B58*C58*G57*B54*G54)^(1/2) I B F G Deviation from Square of Year A mean deviation Year 0.1100 0.0460 0.0021 0.0500 0.0400 -0.0240 0.0006 0.0400 0.1400 0.0760 0.0058 0.0500 47 (0.0500) -0.1140 0.0130 0.0300 50.0800 0.0160 0.0003 (0.0200) 49 50 Sum 0.3200 0.0217 Sum 0.1500 51 Expected return 0.0640 Expected return 0.0300 52 (32%/6) (15%/5) 53 Variance 0.00543 (0.0217/(5-1)) Variance 0.00085 54 Standard deviation 0.0737 Standard deviation 0.0292 55 (root of variance) (root of variance) 56 57 A B Correlation 0.4800 58 Assets weight 0.7900 0.2100 0.0034 (0.0034/(5-1)) 59 60 Expected return of 2 Assets portfolio 0.0569 61 Std. deviation of 2 Assets portfolio | 0.0614

*Please rate thumbs up