Suppose the expected returns and standard deviations of stocks A and B are E(R^A)=0.15, E(r^B)=0.25, s^a=0.1, and s^b=0.2, respectively.

a.Calculate the expested return and standard deviation portfolio that is composed of 40 percent A and 60 percent B when the correlation between returns on A and B is 0.5.

b. Calculate the standard deviation of a portfolio that is composed of 40 percent A and 60 percent B when the correlation coefficient between the returns on A and B is -0.5.

c. How does the correlation between the returns on A and B affect the standard deviation of the portfolio?

Suppose the expected returns and standard deviations of stocks A and B are E(R^A)=0.15, E(r^B)=0.25, s^a=0.1, and s^b=0.2,respectively.

a.Calculate the expested return and standard deviation portfolio that is composed of 40 percent A and 60 percent B when the correlation between returns on A and B is 0.5.
Expected return = Weight of stock A*expected return on ...

Solution Summary

Calculate the standard deviation of a portfolio in this post.

... a. Calculate the expected return and standard deviation of a ... is composed of 35 percent A and 65 percent B when the correlation between the returns on A and ...

... number of observations Sum of Product of deviations = (10.8%-6.3 ... explains how to calculate the expected return, standard deviation of returns, the covariance ...

... a) Compute the expected return for stock... The anticipated annual return for $1000 investment in ... following probability distribution: Returns Probability Economic ...

... 16-18 below, assume the risk-free rate is 8% and the expected rate of return on the ... What do the investors expect the stock to sell for at the end of the ...

... The solution calculates the expected return, variance, standard... Portfolio Returns and Deviations Consider the following ... of State of Rate of Return if State ...

... Coefficient of variation (CV) = Standard deviation of Return/Expected... for the SML and the expected returns from the ...Stock 1 Expected return is higher than fair ...

... and standard deviation of two stocks with returns stated for ... on the attached information, calculate the expected return and standard deviation for the two ...

... 0% this year and a 50% chance of returning 50 ... What are the standard deviations of the returns to Uninvest ...expected return of speculate = 0.5 X 0 + 0.5 X 50% = 25 ...