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Which case will portfolio standard deviation be the smallest

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Reference no: EM132589382

Problem 1: Rank the following U.S. securities in the volatility of their returns (i.e., standard deviation) over the last 80+ years from smallest to largest.

  1. Small stocks (small market capitalization), 1-month Treasury Bills, overall stock market
  2. 1-month Treasury Bills, overall stock market, small stocks (small market capitalization)
  3. Small stocks (small market capitalization), overall stock market, 1-month Treasury Bills
  4. Overall stock market, small stocks (small market capitalization), 1-month Treasury Bills
  5. 1-month Treasury Bills, small stocks (small market capitalization), overall stock market
  6. Overall stock market, 1-month Treasury Bills, small stocks (small market capitalization)

Problem 2: Suppose you have two assets, each has a standard deviation of 0.20. The portfolio weight is 50% for each of the two assets. In which case will the portfolio standard deviation be the smallest?

Reference no: EM132589382

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