Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Consider information given in the table below and answers the question asked thereafter:
| State | Probability | return on stock A | Return on stock B |
| A | 0.15 | 10% | 9% |
| B | 0.15 | 6% | 15% |
| C | 0.10 | 20% | 10% |
| D | 0.18 | 5% | -8% |
| E | 0.12 | -10% | 20% |
| F | 0.30 | 8% | 5% |
Calculate covariance and coefficient of correlation between the returns of the
stocks A and B.
v. Now suppose you have $100,000 to invest and you want to a hold a portfolio
comprising of $45,000 invested in stock A and remaining amount in stock B.
Calculate risk and return of your portfolio.
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