Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building an...
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Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building an investment portfolio containing two stocks, Land M. Stock L will represent 30% of the dollar value of the portfolio, and stock M will account for the other 70%. The historical returns over the next 6 years, 2013 - 2018, for each of these stocks are shown in the following table: E- in order to copy the contents of the data table below into a (Click on the icon here spreadsheet.) Year 16% 2013 2014 Expected return Stock L Stock M 22% 17% 21% 18% 20% 19% 19% 20% 18% 21% 17% 2015 2016 2017 2018 a. Calculate the actual portfolio return, ln, for each of the 6 years. b. Calculate the expected value of portfolio returns, ro, over the 6-year period. C. Calculate the standard deviation of expected portfolio returns, or over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio
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