Same expected return and same variance in return

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Suppose that you have received an inheritance of $10,000 (!) and wish to invest it one or more of 5 different companies. The stock price of each company is the same - $1,000 – and have the same variance. Suppose that we know these each company has the same expected return and the same variance in return. Furthermore, these returns are independent of each other. (a) If you want to minimize the risk (variance) in the expected return from your stock portfolio, how would you invest your $10,000? Explain carefully your answer. (b) How, if at all, would your answer change if the stock returns were NOT independent?

Reference no: EM131127393

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