ZuoTi.Pro
Question

Consider two stocks. Stock A has a standard deviation of 56% and stock B has a...

Consider two stocks. Stock A has a standard deviation of 56% and stock B has a standard deviation of 37%. The stocks have a correlation of -0.05. You plan to invest $6,113 into stock A and $6,720 into stock B. What is the standard deviation of your two stock portfolio? (round weights to 3 decimal places and final answer to 2 decimal places).

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Standard deviation of portfolio:

Oportfolio = wig+wo3 + 2wW2P1,20102 Where: W W 04 02 P12 = = = = = Proportion of the portfolio invested in Asset 1 Proportion

w1 = $6,113/($6,113 + $6,720) = 0.476

w2 = $6,720/($6,113 + $6,720) = 0.524

o= V(0.476 * 0.56)2 + (0.524 * 0.37)2 + (2*0.476 * 0.524 * 0.56*0.37 * -0,05)

0 = V0.071159 +0.037539 -0.00517

0 = V0.10353

0 =0.3218

Standard deviation = 32.18%

0 0
Add a comment
Know the answer?
Add Answer to:
Consider two stocks. Stock A has a standard deviation of 56% and stock B has a...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • You are creating a portfolio of two stocks. The first one has a standard deviation of...

    You are creating a portfolio of two stocks. The first one has a standard deviation of 21% and the second one has a standard deviation of 35%. The correlation coefficient between the returns of the two is 0.1. You will invest 40% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to two decimal places (e.g., 4.32%=4.32).

  • You are creating a portfolio of two stocks. The first one has a standard deviation of...

    You are creating a portfolio of two stocks. The first one has a standard deviation of 29% and the second one has a standard deviation of 39%. The correlation coefficient between the returns of the two is 0.4. You will invest 47% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to two decimal places (e.g., 4.32%=4.32).

  • Consider two stocks, Stock D, with an expected return of 20 percent and a standard deviation...

    Consider two stocks, Stock D, with an expected return of 20 percent and a standard deviation of 36 percent, and Stock I, an international company, with an expected return of 6 percent and a standard deviation of 16 percent. The correlation between the two stocks is –0.01. What are the expected return and standard deviation of the minimum variance portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected Return? Standard deviation?

  • Stocks A and B have the following returns Stock A 0.10 0.07 0.15 -0.05 0.08 Stock...

    Stocks A and B have the following returns Stock A 0.10 0.07 0.15 -0.05 0.08 Stock B 0.06 0.02 0.05 0.01 -0.02 4 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 70% stock A and 30% stock B? a. What are the expected returns of the two...

  • Expected Returns 0.17 0.11 0.30 Standard Deviation 0.12 0.05 Firm A's common stock Firm B's common...

    Expected Returns 0.17 0.11 0.30 Standard Deviation 0.12 0.05 Firm A's common stock Firm B's common stock Correlation coefficient (Computing the standard deviation for a portfolio of two risky investments) Mary Guilott recently graduated from college and is evaluating an investment in two companies' common stock. She has collected the following information abou the common stock of Firm A and Firm B: a. If Mary decides to invest 10 percent of her money in Firm A's common stock and 90...

  • A portfolio is composed of two stocks, A and B. Stock A has a standard deviation...

    A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is .45. Stock A comprises 40% of the portfolio, while stock B comprises 60% of the portfolio. The standard deviation of the return on this portfolio is _________. Please show all work.

  • A portfolio is composed of two stocks, A and B. Stock A has a standard deviation...

    A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 20%, while stock B has a standard deviation of return of 26%. Stock A comprises 60% of the portfolio, while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is .035, the correlation coefficient between the returns on A and B is _________.

  • A portfolio is composed of two stocks, A and B. Stock A has a standard deviation...

    A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is .45. Stock A comprises 10% of the portfolio, while stock B comprises 90% of the portfolio. The standard deviation of the return on this portfolio is closest to: A. 13.9% B. 7.4% C. 19.2% D. 15.4%

  • A portfolio is composed of two stocks, A and B. Stock A has a standard deviation...

    A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 18%, while stock B has a standard deviation of return of 24%. Stock A comprises 60% of the portfolio, while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is 0.033, the correlation coefficient between the returns on A and B is _________. 0.584 0.140 0.351 0.234

  • A portfolio is comprised of two stocks, A and B. Stock A has a standard deviation...

    A portfolio is comprised of two stocks, A and B. Stock A has a standard deviation of return of 25% while stock B has a standard deviation of return of 5%. Stock A comprises 20% of the portfolio while stock B comprises 80% of the portfolio. If the variance of return on the portfolio is .0080, the correlation coefficient between the returns on A and B is __________. A.       -.975 B.       -.025 C.       .025 D.       .975

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT