Question

A portfolio consists of Stock A and Stock B. Data for the 2 stocks is shown below

Stock A: expected return		12%
Stock A: standard deviation		40%
Stock B: expected return		14%
Stock B: standard deviation		60%
Correlation between A and B		0.35
Stock A beta		0.90
Stock B beta		1.20
% portfolio in Stock A		45%
% portfolio in Stock B		55%

A Calculate the expected return of the portfolio

portfolio : expected return

B Calculate the standard deviation of the portfolio

portfolio: standard deviation

C.Calculate the beta of the portfolio

D Does the portfolio have more risk, less risk, or the same risk as the market. Explain.

E. Will your portfolio likely outperform, underperform, or perform the same as the market in a period when stocks are rapidly falling in value? Why?

PLEASE SHOW ALL WORK

Answer 1

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