The overall volatility of the portfolio

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Reference no: EM131973369

Your friend holds a portfolio including two stokcs, A and B, with equal amounts of money invested in each. The volatility of A share prices is the same as the volatility of B share prices. They have a perfectly positive correlation.

1. The overall volatility of the portfolio is:

A) Less than individual volatility of stock A or B

B) More than individual volatility of Stock A or B

C) The same as individual volatility of Stock A or B

D) More information needed.

2. Instead of investing her money equall in each stock, your friend invests 70% of her money in stock A and 30% of her money in stock B. Now the overall volatility of the portfolio is:

A) Increased

B) Decreased

C) Unchanged

D) More information needed.

Reference no: EM131973369

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