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Question A
A portfolio of YYC Inc. and YEG Inc. stocks has an expected return of 11%. Use the information in the table to determine the standard deviation of the portfolio (note that the only assets in the portfolio are the two stocks in the Table below)
YYC: E[R]=8%, Standard deviation 7%
YEG: E[R]=12%, Standard deviation 15%
Correlation of both 0.49
Question B
A portfolio consisting of Meow. and Woof. stocks has zero variance. What is the weight of Toronto stock in this portfolio given the information in the Table below? (Note that the only assets in the portfolio are the two stocks in the Table below.)
Meow: E[R]=8%, standard deviation=7%
Woof: E[R}=12%, standard deviation=15%
Correlation = -1
After six months go by, you receive the first interest payment of $300. The annual market interset rate has declined to 5 percent and you decide to sell the bond. What is the bond's present value when you sell it? show your work.
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The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0940. The variance of Willow is 0.1890, and the variance of Sky Diamond is 0.1210. What is the correlation coefficient between the returns of the two stocks?
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