Reference no: EM131601784
Question: According to the analysts, the return on Company A's stock in the coming year could be -10%, 1%, 7%, or 15%. The corresponding probabilities are 25%, 15%, 20%and 40%, respectively.
In comparison, the return on Company B's stock in the coming year could be - 5%, - 1%, 4%, or 12%. The corresponding probabilities are 10%, 30%, 20%, and 40%, respectively. Suppose we have invested 35% of our capital in A's stock and 65% in B's stock. Historical data suggest that the correlation coefficient between the two stocks is 0.65.
1. What is the standard deviation of each stock ?
2. What is the expected return on our portfolio?
3. What's the standard deviation of the return on our portfolio?
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What is standard deviation of the return on our portfolio
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What is the standard deviation of each stock
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