Correlation coefficient of the returns on the two stocks

Assignment Help Business Management
Reference no: EM132835412

You are given the following information:

Expected return on stock A 12%

Expected return on stock B 20%

Standard deviation of returns:

Stock A 1.0

Stock B 6.0

Correlation coefficient of the returns on stocks A and B +0.2

What are the expected returns and standard deviations of a portfolio consisting of:

100 percent in stock A?

100 percent in stock B?

50 percent in each stock?

25 percent in stock A and 75 percent in stock B?

75 percent in stock A and 25 percent in stock B?

ANSWER

Compare the aforementioned returns and the risk associated with each portfolio.

Redo the calculations assuming that the correlation coefficient of the returns on the two stocks is -0.6. What is the impact of this difference in the correlation coefficient?

Reference no: EM132835412

Questions Cloud

What is the price of the stock : Suppose the company is expected to pay a dividend of $2.5 and the required rate of return is 10% and the growth rate is 4%. What is the price of the stock
Essay on immigration : How to take and use critique to build a better paper. Your Week 6 assignment was a draft; in other words, it was not a finished product
Define withdrawal behavior : Define withdrawal behavior and briefly describe its relationship to organizational commitment.
Discuss what are critical crm requirements each value chain : Discuss What are the critical CRM requirements each value chain member has in the company's CRM efforts. What else can the CPA firm do with its CRM system.
Correlation coefficient of the returns on the two stocks : Redo the calculations assuming that the correlation coefficient of the returns on the two stocks is -0.6.
What are the fabrication department equivalent units : Arona Corporation manufactures canoes in two departments, What are the Fabrication Department's equivalent units of production related to materials for July?
What is the value of the bond : If the investors required rate of return is 12.5% and the remaining time to maturity is 3 years, what is the value of the bond
Explain difference between a cost and a profit center : Elaborate on the implications of a health services department moving from a cast center to a profit center. Information discussed must include.
What the date of declaration for cash dividends is : What the date of declaration for cash dividends is? the date the board of directors determines who will receive dividends. / the date board of directors pays.

Reviews

Write a Review

Business Management Questions & Answers

  Caselet on michael porter’s value chain management

The assignment in management is a two part assignment dealing 1.Theory of function of management. 2. Operations and Controlling.

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. Due to increase in the preference for light beer drinkers, Chris Prangel wants to introduce light beer version in Mountain Man. An analysis into the la..

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. An analysis into the launch of Mountain Man Light over the present Mountain Man Lager.

  Analysis of the case using the doing ethics technique

Analysis of the case using the Doing Ethics Technique (DET). Analysis of the ethical issue(s) from the perspective of an ICT professional, using the ACS Code of  Conduct and properly relating clauses from the ACS Code of Conduct to the ethical issue.

  Affiliations and partnerships

Affiliations and partnerships are frequently used to reach a larger local audience? Which options stand to avail for the Hotel manager and what problems do these pose.

  Innovation-friendly regulations

What influence (if any) can organizations exercise to encourage ‘innovation-friendly' regulations?

  Effect of regional and corporate cultural issues

Present your findings as a group powerpoint with an audio file. In addition individually write up your own conclusions as to the effects of regional cultural issues on the corporate organisational culture of this multinational company as it conducts ..

  Structure of business plan

This assignment shows a structure of business plan. The task is to write a business plane about a Diet Shop.

  Identify the purposes of different types of organisations

Identify the purposes of different types of organisations.

  Entrepreneur case study for analysis

Entrepreneur Case Study for Analysis. Analyze Robin Wolaner's suitability to be an entrepreneur

  Forecasting and business analysis

This problem requires you to apply your cross-sectional analysis skills to a real cross-sectional data set with the goal of answering a specific research question.

  Educational instructional leadership

Prepare a major handout on the key principles of instructional leadership

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd