You put half of your money in a stock that has an expected return of 14% and a standard deviation of 24%. You put the rest of your money in another stock that has an expected return of 6% and a standard deviation of 12%. The two stocks have a correlation of 0.55. What is the standard deviation of the resulting portfolio?
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You put half of your money in a stock that has an expected return of 14% and a standard deviation of 24%. You put the rest of your money in another stock that has an expected return of 6% and a standard deviation of 12%. The two stocks have a correlation of 0.55. What is the standard deviation of the resulting portfolio?
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- The expected return and standard deviation of Stock A are 12% and 24%, respectively. The expected return and standard deviation of Stock B are 5% and 19%, respectively. The correlation between the two stocks is 0.4. The risk-free rate in the economy is 1%. A. What is the Sharpe ratio for Stock A and Stock B? Show your calculation steps briefly and clearly. B. Calculate the optimal risky portfolio P*. You do not need to show your calculation steps for this subquestion. C. Now suppose that the correlation between the two stocks is -0.2 (instead of 0.4). Re-calculate the optimal risky portfolio P* and compare it to your answer in Part B. What do you observe? You do not need to show your calculation steps for this subquestion. D. Using the results above, briefly explain why investors might still consider investing in stocks with a (relatively) low Sharpe ratio as a part of their portfolio.Stock A has an expected return of 5% and standard deviation of 10%. Stock B has an expected return of 10% and standard deviation of 15%. The correlation between the two stocks’ returns is 0.70. If you wanted to form a portfolio of these two stocks and wanted that portfolio to have an expected return of 8%, what weights would you put on each stock? Show your work (“algebra”). What would be the standard deviation of this portfolio?You have a portfolio P that consists of 50% Stock X and 50% Stock Y. Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. a. What is the beta for this portfolio? b. What is the standard deviation of this portfolio’s return? c. Describe the significance of the correlation coefficient being zero?
- The correlation coefficients between several pairs of stocks are as follows: Corr(A, B) = .85; Corr(A, C) = .60; Corr(A, D) = .45. Each stock has an expected return of 8% and a standard deviation of 20%.17. If your entire portfolio is now composed of stock A and you can add some of only one stock to your portfolio, would you choose (explain your choice):a. Bb. Cc. Dd. Need more dataSuppose CAPM is true. You are considering investing in an equally weighted portfolio of two stocks, A and B. The betas of these stocks to the market factor are 1.10 and 0.80, respectively. The total return volatilities of stocks A and B are σA=0.20 and σB=0.18, and the standard deviation of the factor’s return is 0.15. 1.b. What is the portfolio’s systematic risk (stated as a variance)? 1.c. What is your portfolio’s total risk (stated as a variance), assuming the idiosyncratic risks of the stocks A and B are uncorrelated? Answer: 1a) 0.95 1b) systematic risk 0.0203 1c) total risk 0.0181 Can anyone help to double confirm the answers? plus question part c seems to be wrong but I don't know why.7. The standard deviation of stock A is 0.25 and the standard deviation of stock B is 0.30. The covariance between A and B is 0.0225. You create a portfolio with a weight of 0.75 in A and 0.25 in B. What is the standard deviation of your portfolio?
- c) Stock 1 has a standard deviation of return of 1%. Stock 2 has a standard deviation of return of 8%. The correlation coefficient between the two stocks is 0.5. If you invest 60% of your funds in stock 1 and 40% in stock 2, what is the standard deviation of your portfolio? Please provide the details of your calculations and discuss your results. You decide now to combine your portfolio (discussed in question c) with another portfolio with the same standard deviation and invest equally in both portfolios. The correlation between the two portfolios is zero. d) What is the standard deviation of this new portfolio? Please provide the details of your calculations and discuss your results.c) Stock 1 has a standard deviation of return of 1%. Stock 2 has a standard deviation of return of 8%. The correlation coefficient between the two stocks is 0.5. If you invest 60% of your funds in stock 1 and 40% in stock 2, what is the standard deviation of your portfolio? Please provide the details of your calculations and discuss your results. You decide now to combine your portfolio (discussed in question c) with another portfolio with the same standard deviation and invest equally in both portfolios. The correlation between the two portfolios is zero. d) What is the standard deviation of this new portfolio? Please provide the details of your calculations and discuss your results. e) Did we achieve diversification by combining uncorrelated portfolios with identical levels of risk? Explain.You are creating a portfolio of two stocks. The first one has a standard deviation of 18.6% and the second one has a standard deviation of 17.1%. The correlation coefficient between the returns of the two is -0.13. You will invest 36% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to one decimal place (e.g., 4.32% = 4.3).
- c) Stock 1 has a standard deviation of return of 1%. Stock 2 has a standard deviation of return of 8%. The correlation coefficient between the two stocks is 0.5. If you invest 60% of your funds in stock 1 and 40% in stock 2, what is the standard deviation of your portfolio? Please provide the details of your calculations and discuss your results.Stock A has an expected return of 5% and standard deviation of 10%. Stock B has an expected return of 10% and standard deviation of 15%. The correlation between the two stocks' returns is 0.70. If you wanted to form a portfolio of these two stocks and wanted that portfolio to have an expected return of 8%, what weights would you put on each stock? What would be the standard deviation of this portfolio?The correlation coefficients between several pairs of stocks are as follows: Corr(A, B) = .85; Corr(A, C) = .60; Corr(A, D) = .45. Each stock has an expected return of 8% and a standard deviation of 20%. If your entire portfolio is now composed of stock A and you can add some of only one stock to your portfolio, would you choose (explain your choice): B C D Need more data