Question
9. A mutual fund manager constructs three portfolios using Oracle and Intel stocks: Portfolio A: $...
9.
A mutual fund manager constructs three portfolios using Oracle and Intel stocks:
Portfolio A: $ 1,100 in Oracle; $2,900 in Intel
Portfolio B: $ 2,000 in Oracle; $2,000 in Intel
Portfolio C: $ 2,500 in Oracle; $1,500 in Intel
The correlation between Oracle’s and Intel’s returns is 0.709. The expected returns are 15.5% and 13% for Oracle and Intel, respectively. The standard deviation is 45.00% for Oracle stock and 35.00% for Intel stock.
Calculate the expected returns and standard deviations for the three portfolios. Rank the three portfolios and provide explanation for your ranking. Please show your calculation.
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