Purchase Solution

Finance:Portfolio return, standard deviation.

Not what you're looking for?

Ask Custom Question

5.13 in Ch. 5

Expected return
Year Stock L Stock M

2010 14% 20%
2011 14 18
2012 16 16
2013 17 14
2014 17 12
2015 19 10

P5â?"13 Portfolio return and standard deviation Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The expected returns over the next 6 years, 2010â?"2015, for each of these stocks are shown in the following table:

a. Calculate the expected portfolio return, rp, for each of the 6 years.

b. Calculate the expected value of portfolio returns, , over the 6-year period.

c. Calculate the standard deviation of expected portfolio returns, rp, over the
6-year period.

d. How would you characterize the correlation of returns of the two stocks L and M?

e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio.

Purchase this Solution

Solution Summary

The problem set deal with topics in finance: Portfolio management.

Solution provided by:
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
Recent Feedback
  • "Thank you."
  • "thank you Chidi Ngene.. if you have any APA references would be great"
  • "Thank you so much for your help, your explanations were easy to understand and apply!"
  • "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
  • "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"
Purchase this Solution

Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Operations Management

This quiz tests a student's knowledge about Operations Management