What is the portfolios expected risk

Assignment Help Financial Management

Reference no: EM13885295

A portfolio is invested 40 percent in Stock G and 60 percent in Stock J. The expected returns on these stocks are 10 percent and 15 percent respectively. The standard deviations of these stocks are 10% and 18% and the correlation coefficient between the two stocks is 0.25.

What is the portfolio’s expected risk? Show detailed calculations

Is there any benefit of combining the two stocks? Or will individual stocks provide better risk adjusted returns?

Reference no: EM13885295

Questions Cloud

What is the amount of the interest for third year of loan : You are borrowing $6,000 today. The loan is an amortized 6-year loan with an APR of 8 percent. The loan requires that $1,000 of the principal amount be repaid each year. Payments are to be made annually. What is the amount of the interest for the thi..

Based on just-completed survey-growth rate in economy : Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to be 2 percent in the coming year, as compared to 5 percent for the past year. Will security prices increase, decrease, or stay the sam..

Savings account at bank and made an initial deposit : You opened a savings account at a bank and made an initial deposit. The account pays 8% interest compounded annually. You made no additional deposits and in exactly one year you close the account and take out off of the money. The balance at the time..

What level of pretax cost savings do we require for project : A proposed cost-saving device has an installed cost of $630,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The device has an estimated year 5 salvage value of $70,000. What level..

What is the portfolios expected risk : A portfolio is invested 40 percent in Stock G and 60 percent in Stock J. The expected returns on these stocks are 10 percent and 15 percent respectively. The standard deviations of these stocks are 10% and 18% and the correlation coefficient between ..

What is the break-even cost per kilowatt-hour : Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.46 and lasts for 1,000 hours. You require a return of 11 percent and use a light fi..

What bid price should you submit on the contract : Consider a project to supply 104 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,940,000 five years ago; if the land were sold today, it would net you $2,140,0..

Discussion focuses on mass communications-advertising : This Discussion focuses on mass communications, advertising, sales promotions, and public relations. Select one article that applies to mass communications, advertising, sales promotions, or public relations. Keep in mind, when responding to each uni..

User Account

All Pages