Transcribed Image Text
2. Two stocks A and B have expected returns, and avariance-covariance matrix of returns given in Table 1.Table 1 Stock AStock BE(R)0.140.08Variance-covariance matrix:Stock AStock BStock A0.040.012Stock B0.0120.0225a) What is the correlation coefficient between the returns onstock A and stock B?b) What is the expected return and standard deviation ofportfolio S which is invested 80% in stock A and 20% instock B?c) If you combine portfolio S with a risk free assetpaying a return of 4%, what would be the expected return on a newportfolio V if you desire a standard deviation of27.9%?d) Plot in mean-standard deviation space the efficiency frontierbetween Stock A and Stock B, and identify portfolios S andV.
Other questions asked by students
Finance
Basic Math
Q
Suppose the proportion of left-handed individuals in a population is θ. Based on a simple random...
Statistics
Accounting