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Problem 6-06 Given: E(R1) = 0.12 E(R2) = 0.16 E(σ1) = 0.04 E(σ2) = 0.07 Calculate...

Problem 6-06

Given:

E(R1) = 0.12
E(R2) = 0.16
E(σ1) = 0.04
E(σ2) = 0.07

Calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0.65 under the conditions given below. Do not round intermediate calculations. Round your answers to four decimal places.

  1. w1 = 1.00

    Expected return of a two-stock portfolio:

    Expected standard deviation of a two-stock portfolio:

  2. w1 = 0.75

    Expected return of a two-stock portfolio:

    Expected standard deviation of a two-stock portfolio:

  3. w1 = 0.55

    Expected return of a two-stock portfolio:

    Expected standard deviation of a two-stock portfolio:

  4. w1 = 0.25

    Expected return of a two-stock portfolio:

    Expected standard deviation of a two-stock portfolio:

  5. w1 = 0.10

    Expected return of a two-stock portfolio:

    Expected standard deviation of a two-stock portfolio:

Choose the correct risk–return graph for weights from parts (a) through (e) when ri,j = -0.65; 0.00; 0.65.

The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 11 .

A.
B.
C.
D.
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