Question

Suppose Wesley​ Publishing's stock has a volatility of 50 %​, while Addison​ Printing's stock has a volatility of 20 %. If the correlation between these stocks is 65 %​, what is the volatility of the following portfolios of Addison and​ Wesley:

a. 100 % Addison

b. 75 % Addison and 25 % Wesley

c. 50 % Addison and 50 % Wesley

a. The volatility of a portfolio of 100 % Addison stock is nothing​ _______ %. ​ (Round to two decimal​ places.)

b. The volatility of a portfolio of 75 % Addison and 25 % Wesley is nothing​ ______ %. ​ (Round to two decimal​ places.)

c. The volatility of a portfolio of 50 % Addison and 50 % Wesley is nothing​ _______ %. ​ (Round to two decimal​ places.)

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -