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What portfolio of the two stocks has the smallest possible

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1.Using your estimates from Problem 5, calculate the volatility (standard deviation) of a portfolio that is 70% invested in stock A and 30% invested in stock B.

2.Using the data from Table 11.3, what is the covariance between the stocks of Alaska Air Lines and Southwest Air Lines?

3.Suppose two stocks have a correlation of 1. If the first stock has an above average return this year, what is the probability that the second stock will have an above average return?

4.Arbor Systems and Gencore stocks both have a volatility of 40%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) + 1, (b) 0.50,(c) 0, (d) −0.50, and (e) −1.0. In which cases is the volatility lower than that of the original stocks?

5.Suppose Avon and Nova stocks have volatilities of 50% and 25%, respectively, and they are perfectly negatively correlated. What portfolio of these two stocks has zero risk?

6.Suppose Tex stock has a volatility of 40%, and Mex stock has a volatility of 20%. If Tex and Mex are uncorrelated,

a. What portfolio of the two stocks has the same volatility as Mex alone?

b. What portfolio of the two stocks has the smallest possible volatility?

7.Using the data from Table 11.3, what is volatility of an equally weighted portfolio of Microsoft, Alaska Air, and Ford Motor stock?

Reference no: EM13495610

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