Here are some historical data on the risk characteristics of Ford and Harley Davidson. Assume...
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Here are some historical data on the risk characteristics of Ford and Harley Davidson. Assume the standard deviation of the return on the market was 19.0%. a. The correlation coefficient of Ford's return versus Harley Davidson is 0.44. What is the standard deviation of a portfolio invested half in each share? b. What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills? c. What is the standard deviation if the portfolio is split evenly between Ford and Harley Davidson and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker? d-1. What is the approximate standard deviation of a portfolio composed 100 stocks with betas of 1.68 like Ford? d-2. What is the approximate standard deviation of a portfolio composed of 100 stocks with betas of 0.73 like Harley (For all requirements, use decimals, not percent, in your calculations. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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