Portfolio diversification stocks offer an expected rate

Reference no: EM13256835

Portfolio Diversification Stocks offer an expected rate of return of 10% with a standard deviation of 20%, whereas gold offers an expected return of 5% with a standard deviation of 25%. a) In light of the apparent inferiority of gold to stocks in terms of return and volatility, why would anyone want to hold gold? Illustrate it graphically. b) What would be your answer to (a) if the correlation coefficient between stocks and gold was +1? Please draw a diagram to explain.

Reference no: EM13256835

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