Question

Hyacinth Macaw invests 66% of her funds in stock I and the balance in stock J....

Hyacinth Macaw invests 66% of her funds in stock I and the balance in stock J. The standard deviation of returns on I is 10%, and on J it is 26%.

a. Calculate the variance of portfolio returns, assuming the correlation between the returns is 1.

Portfolio variance            

     

b. Calculate the variance of portfolio returns, assuming the correlation is .3. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

     

Portfolio variance            

    

c. Calculate the variance of portfolio returns, assuming the correlation is 0.

Portfolio variance   

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