Eric Poppovich invests money in two stocks for the upcoming year. His investment is shown below:...
Eric Poppovich invests money in two stocks for the upcoming year. His investment is shown below:
| STOCK: | # of shares | Price Per Share | Expected Return | Standard Deviation |
|---|---|---|---|---|
| LBJ Corporation (A) | 48.00 | $36.31 | 5.00% | 20.00% |
| Duncan Inc. (B) | 29.00 | $50.49 | 9.00% | 22.00% |
The correlation between LBJ and Duncan is 0.50.
What is the expected return for the portfolio in the coming year?
Homework Answers
wa = (48 * 36.31) / (48*36.31 + 29 * 50.49) = 0.5434459276
wb = (29 * 50.49) / (48*36.31 + 29 * 50.49) = 0.4565540724
Expected return = 0.0682621629 = 6.82621629%
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