Suppose Intel's stock has an expected return of 26% and a volatility (standard deviation) of 50%, while Coca-Cola's stock has an expected return of 6% and a volatility of 25%. If these two stocks were perfectly negatively correlated (i.e. their correlation is -1) a) Calculate the portfolio weights that remove all risk. b) What is the risk-free rate of interest in this economy?
Suppose Intel's stock has an expected return of 26% and a volatility (standard deviation) of 50%, while Coca-Cola's stock has an expected return of 6% and a volatility of 25%. If these two stocks were perfectly negatively correlated (i.e. their correlation is -1) a) Calculate the portfolio weights that remove all risk. b) What is the risk-free rate of interest in this economy?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 12P
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