The correlation between the two stocks is 0.5.
Expected return (%) Standard Deviation (%) Weight
Microsoft 28 42 0.4
Coca-Cola 12.5 21 0.6
The standard deviation of rachels portfolio is 25.55%
James decides to follow her wife’s suggestion. But, he would prefer a lower volatility for his investment. He decides to invest 40% of his wealth into the T-bills, and 60% in Rachel’s portfolio.
What is the proportion of his investments in each asset?
He would invest ________% into the T-bills, ________% into Microsoft, and _________% into Coca-Cola.
Note: please fill in a whole number for each blank.
He would invest in:
T-bills = 40%
Microsoft = 0.4*60% = 24%
Coca-cola = 0.6*60% = 36%
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
The correlation between the two stocks is 0.5. Expected return (%) Standard Deviation (%) Weight Microsoft ...
Question 1 gives you the information of the stocks and their correlation, which will be used in many of the following questions. James, a portfolio manager, would like to form the following portfolio between Microsoft and Coca-Cola: Expected return (%) Standard Deviation (%) Weight Microsoft 28 42 0.4 Coca-Cola 12.5 21 0.6 The correlation between the two stocks is 0.5. Rachel, James’ wife, suggests a portfolio which consists 60% of Microsoft and 40% of Coca-Cola. The information...
Question 1 gives you the information of the stocks and their correlation, which will be used in many of the following questions. James, a portfolio manager, would like to form the following portfolio between Microsoft and Coca-Cola: Expected return (%) Standard Deviation (%) Weight Microsoft 28 42 0.4 Coca-Cola 12.5 21 0.6 The correlation between the two stocks is 0.5. What is the expected return of the portfolio? ______% Rachel, James’ wife, suggests a portfolio which consists...
James, a portfolio manager, would like to form the following portfolio between Microsoft and Coca-Cola: Expected return (%) Standard Deviation (%) Weight Microsoft 28 42 0.4 Coca-Cola 12.5 21 0.6 The correlation between the two stocks is 0.5. Rachel, James’ wife, suggests a portfolio which consists 60% of Microsoft and 40% of Coca-Cola. What is the standard deviation of Rachel’s portfolio? ______%
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