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The realized returns for stock A and stock B from 2004-2009 are provided in the table below Year 2004 2005 2006 2007 2008 2009 Stock A -8% 22% 7% -3% 4% 11% Stock B 20% 6% 29% -4% -9% 24% Suppose you create a portfolio that is 60% invested in stock A and 40% invested in stock B. The correlation between the returns of the two stocks is 6.27% (a) Calculate the expected return and volatility (as percents) of this portfolio. (Round your answer for volatility to two decimal places.) expected return volatility % (b) Calculate the relevant risk (as a percent) of each asset in this portfolio (the risk the investor cares about). The correlation between the returns of this portfolio and stock A, Corr(Rp), is 73.40%. The correlation between the returns of this portfolio and stock B, Corriere), is 72.38%. (Round your answers to two decimal places.) stock A 0 % stock B 3. -11 points UTPBFin1 II.E.014. My Notes You observe a portfolio for five years and determine that its average annual return is 15% and the standard deviation of its returns is 19%. Can you be 95% confident that this portfolio will not lose more than 25% of its value next year? Yes ο No

Answer 1

Lamy Answer to Doporter Refungen 90 -3 bus-400.0 Total Anesage 1124 33 66 5.5%. Expected Retina 5.5%.X 60%. + 11x404 (s. 2 (0.6²+ (²x (0.4)² + 2x5.5811 x0.64 0.4 X 617 a v 30 at 182 =[ 14.57 Til O 08 (6) Stocks A L a Relevant siste VABX CAN GR - 6.274 x 73.40% 24.60 Stock B 6.27%. X 72.384. 2 2.37 4.