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Question
given the following information:
expected return on stock a .12 (12%)
standard deviation of return .1
expected return on stock b .20 (20%)
standard deviation of return .6
correlation coefficient of the
returns on stock a and stock b .2
a. what are the expected returns and standard deviations of the following portfolios:
1> 100 percent of funds invested in stock a
2> 100 percent of funds invested in stock b
3> 50 percent of funds invested in each stock?
b. what would be the impact if the correlation coefficient were 0.6 instead of 0.2?
Answer
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