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Risk characteristic of wipro and tata motors

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Reference no: EM132487744

Here are some historical data on the risk characteristic of Wipro and Tata Motors.

Wirpo-:

Beta= 1.25

Yearly SD of return % = 41.88

Tata-:

Beta = 1.33

Yearly SD of return %= 40.57

The SD of the return on the market was 22.8%.

a.The correlation coefficient of Wirpo return versus Tata is .72. What is the standard deviation of a portfolio invested half in each share?

b. What is the standard deviation of a portfolio invested one-third in Wirpo, one third in Tata, and one-third in risk-free Treasury bills?

c. What is the standard deviation if the portfolio is split evenly between Wirpo and Tata and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker?

d. What is the approximate standard deviation of a portfolio composed of 100 stocks with betas of 1.25 like Wirpo? How about 100 stocks like Tata? (Hint: Part (d) should not require anything but the simplest arithmetic to answer.)

Reference no: EM132487744

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