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  3.    stock a   stock b 1   0.09   0.06 2  

   Stock A   Stock B 1   0.09   0.06 2   0.05   0.02 3   0.14   0.03 4   -0.03   0.02 5   0.08   -0.01 a....

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Finance

   Stock A   Stock B
1   0.09   0.06
2   0.05   0.02
3   0.14   0.03
4   -0.03   0.02
5   0.08   -0.01

a. What are the expected returns of the two stocks?

b. What are the standard deviations of the returns of the twostocks?

c. If their correlation is 0.44, what are the expected returnand standard deviation of a portfolio of 66% stock A and 34% stockB?

Answer & Explanation Solved by verified expert
4.4 Ratings (891 Votes)
Stock A ReturnStock B Return009006005002014003003002008001a Expected ReturnExpected Return is the mean of all given returnsExpected Return of Stock A ERA 0090050140030085 0066Expected Return of Stock B ERB 0060020030020015 0024AnsweraExpected Return of Stock A ERA 0066Expected Return of Stock B ERB 0024b Standard Deviations of the returns of the twostocksStandard Deviation    See Answer
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Transcribed Image Text

   Stock A   Stock B1   0.09   0.062   0.05   0.023   0.14   0.034   -0.03   0.025   0.08   -0.01a. What are the expected returns of the two stocks?b. What are the standard deviations of the returns of the twostocks?c. If their correlation is 0.44, what are the expected returnand standard deviation of a portfolio of 66% stock A and 34% stockB?

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