Question

Stock A has a standard deviation of returns of 48% and Stock B has a standard deviation of returns of 49%. Suppose you decide to invest all of your investment funds in these two stocks, and 65% is invested in Stock A. The correlation coefficient of returns for these two stocks is 0.18. What is the standard deviation of returns for the combined investment in these two stocks?

Answer #1

Ans. Portfolio Variance =
w^{2}_{A}*σ^{2}(R_{A}) +
w^{2}_{B}*σ^{2}(R_{B}) +
2*(w_{A})*(w_{B})*Cov(R_{A},
R_{B})

where cov (X,Y) = covariance between X and Y

σ_{X} = standard deviation of X

σ_{Y} = standard deviation of Y

P_{XY} =
correlation coefficient between X and Y

Portfolio Variance =
w^{2}_{A}*σ^{2}(R_{A}) +
w^{2}_{B}*σ^{2}(R_{B}) +
2*(w_{A})*(w_{B})*P_{AB}*σ(R_{A})*σ(R_{B})

Standard deviation of combined investment = Portolio Variance

Variance = (.48)^{2}(.65)^{2} +
(.35)^{2}(.49)^{2} +
2*(0.65)*(0.35)*(0.18)*(0.48)*(0.49)

Variance = 0.15

Standard Deviation = Variance

Standard Deviation = 0.39

Assume that you have invested in two stock A and B. Stock A has
a standard deviation of return of 10 percent. Stock B has a
standard deviation of return of 20 percent. The correlation
coefficient between the two stocks is 0.25. If you invest 70
percent of your funds in stock A and 30 percent in stock B, what is
the standard deviation of your portfolio?

Stock A has an expected return of 12%, a standard deviation of
24% on its returns, and a beta of 1.2. Stock B has an expected
return of 15%, a standard deviation of 30% on its returns, and a
beta of 1.5. The correlation between the two stocks is 0.8. If we
invested $30,000 in Stock A and $20,000 in Stock B, what is the
beta of our portfolio?
Select one:
a. 1.03
b. 1.25
c. 1.32
d. 1.40
e....

Suppose Stock X offers the return of 15% with a standard
deviation of 12%; Stock Y offers the return of 24% with a standard
deviation of 26%. These two stocks have the correlation coefficient
of 0.2. If you invest 60% in stock X and the rest in Stock Y, what
is your portfolio return? What is your portfolio standard
deviation

Suppose Stock X offers the return of 15% with a standard
deviation of 12%; Stock Y offers the return of 24% with a standard
deviation of 26%. These two stocks have the correlation coefficient
of 0.2. If you invest 60% in stock X and the rest in Stock Y, what
is your portfolio return? What is your portfolio standard
deviation?

A portfolio is composed of two stocks, A and B. Stock A has a
standard deviation of return of 23% while stock B has a standard
deviation of return of 21%. Stock A comprises 40% of the portfolio
while stock B comprises 60% of the portfolio. If the variance of
return on the portfolio is .0380, the correlation coefficient
between the returns on A and B is __________.
0.589
0.604
0.599
0.579

You are creating a portfolio of two stocks. The first one has a
standard deviation of 21% and the second one has a standard
deviation of 34%. The correlation coefficient between the returns
of the two is 0.2. You will invest 38% of the portfolio in the
first stock and the rest in the second stock. What will be the
standard deviation of this portfolio's returns? Answer in percent,
rounded to two decimal places (e.g., 4.32%=4.32).

You are creating a portfolio of two stocks. The first one has a
standard deviation of 28% and the second one has a standard
deviation of 40%. The correlation coefficient between the returns
of the two is 0.3. You will invest 50% of the portfolio in the
first stock and the rest in the second stock. What will be the
standard deviation of this portfolio's returns? Answer in percent,
rounded to two decimal places (e.g., 4.32%=4.32).

A portfolio is composed of two stocks, A and B. Stock A has a
standard deviation of return of 20%, while stock B has a standard
deviation of return of 26%. Stock A comprises 60% of the portfolio,
while stock B comprises 40% of the portfolio. If the variance of
return on the portfolio is 0.035, the correlation coefficient
between the returns on A and B is _________.
A .157
B.392
C.235
D.102

A portfolio is composed of two stocks, A and B. Stock A has a
standard deviation of return of 24%, while stock B has a standard
deviation of return of 18%. Stock A comprises 60% of the portfolio,
while stock B comprises 40% of the portfolio. If the variance of
return on the portfolio is 0.041, the correlation coefficient
between the returns on A and B is _________.
Multiple Choice
0.727
0.436
0.291
0.131

9. The standard deviation of annual returns for Stock #1 is 76%
and for Stock #2 is 40%. The correlation of Stock #1's returns to
Stock #2's returns is +1. If you buy $40 worth of Stock #1, how
much worth of Stock #2 must you trade in order to created a hedged
portfolio of the two stocks? If you want buy Stock #2, make it a
positive number and if you want to short-sell Stock #2, type a
negative...

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