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lean x , Mrdap . Cengage ' nbu ndex.html?nbld-824572&nbNodeld-317510246;& r-) ? Seure https://ng engage on stati MINDTAP FIN 331 AOL FINAL REVIEW portromo are snown in the To Towing Standard Deviatiorn 37.00% 41.00% 44.00% 46.00% Percentage of Expected Portfolio 20% 30% 35% 1596 Return 8.00% 14.00% 11.00% 3.00% Stock Artemis Inc. Babish & Co Cornell Industries Danforth Motors What is the expected return on Andre's stock portfolio? 7.58% ? 15.15% Q 10.10% ? 13.64% Suppose each stock in Andre's portfolio has a correlation coefficient of 0.40 (p -0.40) with each of the other stocks. The market's average standard deviation is approximately 20%, and the weighted average of the risk of the individual securities in the partially diversified four-stock portfolio is 42%. If 40 additional, randomly selected stocks with a correlation coefficient of o.30 with the other stocks in the portfolio were added to the portfolio, what effect would this have on the portfolio's standard deviation (ap) It would gradually settle at approximately 50%. It would decrease gradually, settling at about 0%. it would stay constant at 42%. It would gradually settle at approximately 20%. O Type here to searchExplanation / Answer
Expected Return on Andre’s Stock Portfolio = 10.10%
Expected Return = Sum of [ Expected Return x Percentage of Portfolio ]
= [ 8% x 0.20 ] + [ 14% x 0.30 ] + [ 11% x 0.35 ] + [ 3% x 0.15 ]
= 1.60% + 4.20% + 3.85% + 0.45%
= 10.10%
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