A portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below. Calculate the expected return of the portfolio Calculate the standard deviation of the portfolio. Calculate the beta of the portfolio Is your portfolio less risky or more risky than the market? Explain. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why?       STOCK X EXPECTED RETUR      10% STOCK X STANDARD DEVIATION     30%         STOCK Y EXPECTED RETURN      14% STOCK Y STANDARD DEVIATION     40% CORRELATION BETWEEN X AND Y     0.30 STOCK X BETA      0.90 STOCK Y BETA       0.85 %PORTFOLIO IN X      40%         %PORTFOLIO Y     60%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13P
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A portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below.

Calculate the expected return of the portfolio

Calculate the standard deviation of the portfolio.

Calculate the beta of the portfolio

Is your portfolio less risky or more risky than the market? Explain.

Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why?

 

 

 

STOCK X EXPECTED RETUR      10%
STOCK X STANDARD DEVIATION     30%
       
STOCK Y EXPECTED RETURN      14%
STOCK Y STANDARD DEVIATION     40%
CORRELATION BETWEEN X AND Y     0.30
STOCK X BETA      0.90
STOCK Y BETA    

 

0.85

%PORTFOLIO IN X      40%
       
%PORTFOLIO Y     60%
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