QUESTION 7 Your uncle holds just one stock, East Coast Bank (ECB). You agree that this...

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Question

QUESTION 7 Your uncle holds just one stock, East Coast Bank (ECB). You agree that this stock is relatively safe, but you want

Answer 1

Answer #1

ECB -10% 25% -5% 10% SD1 0.7 0.158114 WCB 10% -5% -1% 25% SD2 W2 0.134257 W1 0.3 COVAR -0.00383 Risk in holding only ECB whil

As mentioned above Risk in holding only ECB is 39.76% while portfolio risk is 11.07%.

To calculate this one can use modern portfolio theory.

Answer 2

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