HomeworkLib
Question

WeVest Financial Advisors suggests an investment in two stocks (40% in Stock A and 60% in Stock B). They claim the investmenta. Using a 40/60 split, what is the weighted average standard deviation of the two stocks?

b. Recalculate the standard deviation of a portfolio of the two stocks

c. What is the reduction in standard deviation that results from the creation of a portfolio of the two stocks?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Stock A 2012 14.87% 2013 15.78% 2014 12.57% 2015 10.81% 2016 11.28% Returns(%) Weight Weight of stock of stock Stock B Portfo

*Please rate thumbs up

0 0
Add a comment
Know the answer?
Add Answer to:
a. Using a 40/60 split, what is the weighted average standard deviation of the two stocks?...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • WeVest Financial Advisors suggests an investment in two stocks (40% in Stock A and 60% in...

    WeVest Financial Advisors suggests an investment in two stocks (40% in Stock A and 60% in Stock B). They claim the investment will reduce risk through diversification, but they need proof. This is the historical returns for the two stocks. Year Returns (%) Stock A Stock B 2012 14.72% 10.36% 2013 15.60% 11.30% 2014 12.69% 10.91% 2015 10.90% 12.26% 2016 11.40% 7.96% a. Using a 40/60 split, what is the weighted average standard deviation of the two stocks? (Enter your...

  • You are creating a portfolio of two stocks. The first one has a standard deviation of...

    You are creating a portfolio of two stocks. The first one has a standard deviation of 21% and the second one has a standard deviation of 35%. The correlation coefficient between the returns of the two is 0.1. You will invest 40% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to two decimal places (e.g., 4.32%=4.32).

  • Consider two stocks, Stock D, with an expected return of 20 percent and a standard deviation...

    Consider two stocks, Stock D, with an expected return of 20 percent and a standard deviation of 36 percent, and Stock I, an international company, with an expected return of 6 percent and a standard deviation of 16 percent. The correlation between the two stocks is –0.01. What are the expected return and standard deviation of the minimum variance portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected Return? Standard deviation?

  • Calculate the standard deviation for the two stocks

    Consider the following information: Probability of StateRate of Return if State OccursEconomyof EconomyStock AStock B  Recession.24              .055         –.34           Normal.64              .135         .24           Boom.12              .230         .47          a.Calculate the expected return for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)b.Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)  

  • You are creating a portfolio of two stocks. The first one has a standard deviation of...

    You are creating a portfolio of two stocks. The first one has a standard deviation of 29% and the second one has a standard deviation of 39%. The correlation coefficient between the returns of the two is 0.4. You will invest 47% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to two decimal places (e.g., 4.32%=4.32).

  • The following are estimates for two stocks. Firm-Specific Standard Deviation Stock A B Expected Return 108...

    The following are estimates for two stocks. Firm-Specific Standard Deviation Stock A B Expected Return 108 17 Beta 0.80 1.30 298 40 The market index has a standard deviation of 19% and the risk-free rate is 6%. a. What are the standard deviations of stocks A and B? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Stock A Stock B b. Suppose that we were to construct a portfolio with proportions: Stock A Stock B T-bills...

  • The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 15%...

    The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 15% 0.60    26% B 23    1.15    38    The market index has a standard deviation of 21% and the risk-free rate is 9%. a. What are the standard deviations of stocks A and B? (Do not round intermediate calculations. Enter your responses as decimal numbers rounded to 2 decimal places).      Stock A      Stock B    b. Suppose that we were...

  • Assume that a stocks had an expected return of 12.00 percent and a standard deviation of 7.00 percent

    Question 8Assume that a stocks had an expected return of 12.00 percent and a standard deviation of 7.00 percent. What is the low end of returns would you expect to see 95 percent of the time? (Enter your answers as a percentage rounded to 2 decimal places. For example, enter 8.43% instead of 0.0843) Question 10 Calculate the expected return on a portfolio that contains 30% of a stock with an expected return of -1% and 70% of a stock with an...

  • A portfolio is composed of two stocks, A and B. Stock A has a standard deviation...

    A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is .45. Stock A comprises 40% of the portfolio, while stock B comprises 60% of the portfolio. The standard deviation of the return on this portfolio is _________. Please show all work.

  • The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10...

    The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10 % 0.70 28 % B 18 1.25 42 The market index has a standard deviation of 22% and the risk-free rate is 7%. a. What are the standard deviations of stocks A and B? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Suppose that we were to construct a portfolio with proportions: Stock A 0.35 Stock B 0.35 T-bills...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT