Stock A has a standard deviation of 3.5% while stock B has a standard deviation of 4.6%. If both stocks are combined to form a 2-asset portfolio, how much of your funds (in percentage) should be allocated to stock A and B respectively in order to gain maximum diversification benefit?
Stock A has a standard deviation of 3.5% while stock B has a standard deviation of 4.6%. If both stocks are combined to form a 2-asset portfolio, how much of your funds (in percentage) should be allocated to stock A and B respectively in order to gain maximum diversification benefit?
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
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a) Stock A has a standard deviation of 3.5% while stock B has a standard deviation of 4.6%. If both stocks
are combined to form a 2-asset portfolio, how much of your funds (in percentage) should be allocated to
stock A and B respectively in order to gain maximum diversification benefit?
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