Company A’s stock has an expected return of 0.10 and a standard deviation of 0.25. Company B’s stock has an expected return of 0.16 and a standard deviation of 0.40. The correlation coefficient between the two stock’s return is 0.2. If a portfolio consists of 40% of Company A and 60% of Company B, what’s the expected return of the portfolio?
Company A’s stock has an expected return of 0.10 and a standard deviation of 0.25. Company B’s stock has an expected return of 0.16 and a standard deviation of 0.40. The correlation coefficient between the two stock’s return is 0.2. If a portfolio consists of 40% of Company A and 60% of Company B, what’s the expected return of the portfolio?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3P: Two-Asset Portfolio
Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...
Related questions
Question
Company A’s stock has an expected return of 0.10 and a standard deviation of 0.25. Company B’s
stock has an expected return of 0.16 and a standard deviation of 0.40. The correlation coefficient
between the two stock’s return is 0.2. If a portfolio consists of 40% of Company A and 60% of
Company B, what’s the expected return of the portfolio?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT