Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: Stock...

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Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: Stock...

Use the table for the question(s) below.

Consider the following expected returns, volatilities, and correlations:

Stock	Expected Return	Standard Deviation	Correlation with Duke Energy	Correlation with Microsoft	Correlation with Wal-Mart
Duke Energy	14%	6%	1.0	-1.0	0.0
Microsoft	44%	24%	-1.0	1.0	0.7
Wal-Mart	23%	14%	0.0	0.7	1.0

The volatility of a portfolio that is equally invested in Duke Energy and Microsoft is closest to:

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Answer 1

Answer #1

Portfolio volatility = woo + wino + 2 x Pomto ox ayX LUX Wom where : 0.50 0.50 Wp = weight of Duke Energy WM = weight of Micr

The volatility of a portfolio that is equally invested in Duke Energy and Microsoft is closest to 9%

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Answer 2

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