Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 5. portfolio standard deviation and diversificatio

5. Portfolio standard deviation and diversification: You are asked to give financial advice to a...

80.2K

Verified Solution

Question

Finance

5. Portfolio standard deviation and diversification: You are asked to give financial advice to a mutual fund manager. The fund has had a history of investing in an equally-weighted portfolio of 50 stocks and is considering cutting down the number of stocks to 10 or 20. You assume that all stocks the fund is considering investing in have the same standard deviation of 40% and that the correlation between each pair of stocks is identical and equal to 0.25.

a. To start your analysis, you calculate the standard deviation of the equally weighted portfolios with 10, 20, and 50 assets.

b. Given your answers to part a. what is the advice that you give the mutual fund manager?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

of unit test Right Triangle Based on the figure select all true equations 48 A...

Geometry
Q

Challenges encountered throughout process of collecting data, computing data, and using Highway Capacity Software (HCS)

Civil Engineering
Q

Retreating glaciers leave behind boulders of plucked rock callederraticstillitesstratified drifttill

Biology
Q

What is meant by the focal length of a camera sensing system and (1) how...

Biology
Q

Select the standard form for each conic section equation below 12 x 4x 4y 20...

Calculus
Q

Consider the following account balances of Evan McGruder, Incorporated, as of December 31, Year 3:...

Accounting
Q

Jake's Roof Repair has provided the following data concerning its costs: For example, wages and...

Accounting
Q

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool,...

Accounting
Q

On January 1, 2010, the Smith Corporation acquired 13% bonds with a face value of...

Accounting
Q

Which manager or who is most likely responsible for direct material price variances? A. Marketing....

Accounting
Q

Wren Corporation (a minority shareholder in Lark Corporation) has made loans to Lark Corporation that...

Accounting
Q

Inventory by Three Methods; Cost of Goods Sold The units of an item available for...

Accounting