Two securities are combined into equally weighted portfolio

Assignment Help Financial Management

Reference no: EM131054879

Assume two securities are negatively correlated. If these two securities are combined into an equally weighted portfolio, the portfolio standard deviation must be:

a. equal to the standard deviation of the overall market.

b. equal to zero.

c. less than the weighted average of the standard deviations of the individual securities.

d. equal to or greater than the lowest standard deviation of the two securities.

e. equal to the arithmetic average of the standard deviations of the individual securities.

Reference no: EM131054879

Questions Cloud

Estimate of the stocks current price : A company currently pays a dividend of $2.25 per share (D0 = $2.25). It is estimated that the company's dividend will grow at a rate of 22% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2..

Portfolio weights of each stock : Portfolio Weights If you own 270 shares of Air Line Inc at $18.95, 170 shares of BuyRite at $9.9, and 370 shares of Motor City at $45.95, what are the portfolio weights of each stock?

Interested in forecasting expected return : Suppose you are interested in forecasting expected return next year for a share of stock you have owned for the last three years. Describe in words the steps you would undertake to come up with your forecast.

The investors percentage return on the investment : An investor buys shares in a mutual fund for 10 per share. At the end of the year the fund distributes a dividend of $0.67, and after the distribution the net asset value of a share is $11.12. What would be the investor’s percentage return on the inv..

Two securities are combined into equally weighted portfolio : Assume two securities are negatively correlated. If these two securities are combined into an equally weighted portfolio, the portfolio standard deviation must be:

According to the maturity model : Suppose that a commercial bank has a positive Maturity Gap. In order to reduce the risk of exposure to possible interest rate increases, according to the Maturity Model, the bank should: A. leave the maturity gap as is B. increase the maturity of its..

Holmes aircraft recently announced increase in net income : Holmes Aircraft recently announced an increase in its net income, yet its net cash flow declined relative to last year. Which of the following could explain this performance?

Considering purchasing water filtration system : Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance..

What is the bonds yield to maturity and yield to call : H&M has just issued a callable (at par) ten-year, 8% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $101 and a face value of $100. What is the bond’..

User Account

All Pages