Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:8. (Portfolio of two stocks) The following spreadsheet presents data for stocks
A and B.
A
B
C
1
2
RETURN STATISTICS OF STOCKS A AND B
Stock A
Stock B
3
Average return
15%
10%
4 Variance
0.12
0.07
5 Standard deviation
34.64%
26.46%
6
7 Covariance of return, Cov(AIB)
0.0160
0.1746 <=B7/(B5*C5)
a.
8 Correlation of return
What are the return and the standard deviation of a portfolio com-
posed of 30% of stock A and 70% of stock B?
b. What are the return and the standard deviation of an equally weighted
portfolio of stocks A and B?
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