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Stocks % of Portfolio Expected Return Standar...




Stocks % of Portfolio Expected Return Standard Deviation Artemis 20% 6% 37% Babish & Co 30% 14% 41% Cornwell Ind 35% 11% 44% Danforth Motors 15% 3% 46% What is the expected return of Andre's stock portfolio? 14.55% 7.28% 13.10% 9.70% Suppose each stock in the above portfolio has a correlation coefficient of 0.4 with each of the other stocks. The average standard deviation is around 20% & the weighted average of the risk of the individual securities in the partially diversified portfolio of four stocks is 42%. If 40 additional randomly selected stocks with a correlation coefficient of .3 with other stocks in the portfolio were added to the portfolio, what effect would this have on the portfolio's standard deviation? It would gradually settle at about 20% It would gradually settle at about 50% It would stay constant at 42% It would decrease gradually settling at about 0%


Paper#10419 | Written in 18-Jul-2015

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