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, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The historical returns over the next 6 years 2013 - 2018, for each of these stocks are shown in the following table: Data Table - X a. Calculate the actual portfolio return, Tp, for each of the 6 years. b. Calculate the expected value of portfolio returns, 'p, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, or over the 6-year period. (Click on the icon here in order to copy the contents of the data table below d. How would you characterize the correlation of returns of the two stocks Land M? into a spreadsheet.) Discuss any benefits of diversification achieved by Jamie through creation of the portfolio Expected return a. The actual portfolio return for year 2013 is % (Round to two decimal places.) Year Stock L 2013 14% 20% 2014 14% 18% 2015 16% 16% 2016 17% 14% 2017 17% 12% 2018 19% 10% Stock M
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