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    Analysis of Risk and Return

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    6. You have the following information on two securities in which you have invested:
    Security Return Deviation BETA INVESTED(w)
    Xerox 15% 4.5% 1.20 35%
    Kodak 12% 3.8% 0.98 65%
    A) Which stock is riskier in a portfolio context? Which stock is riskier if you are considering them as individual assets (not part of a portfolio)?
    B) Compute the expected return on the portfolio.
    C) If the securities have a correlation of +0.60, compute the standard deviation of the portfolio.
    D) Compute the beta of the portfolio.

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    Solution Summary

    The solution examines the analysis of risk and return. The beta of the portfolio is determined.