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You have OMR 5,000 to invest in shares of A or B the expected returns and standard deviations of which are as follows.   expected return standard deviation A 17 6 B 25 10 Required: a. Calculate expected return and standard deviation from a portfolio consisting of 50 per cent of A and 50 per cent of B assuming shares in A and B are perfectly negatively correlated. b. What is meant by coefficient of variation? Calculate coefficient of variation for shares in A and B and decide which of the two shares you would prefer to investment in and why?

You have OMR 5,000 to invest in shares of A or B the expected returns and standard deviations of which are as follows.   expected return standard deviation A 17 6 B 25 10 Required: a. Calculate expected return and standard deviation from a portfolio consisting of 50 per cent of A and 50 per cent of B assuming shares in A and B are perfectly negatively correlated. b. What is meant by coefficient of variation? Calculate coefficient of variation for shares in A and B and decide which of the two shares you would prefer to investment in and why?

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...
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You have OMR 5,000 to invest in shares of A or B the expected returns and standard deviations of which are as follows.

  expected return standard deviation
A 17 6
B 25 10


Required:
a. Calculate expected return and standard deviation from a portfolio consisting of 50 per cent of A and 50 per cent of B assuming shares in A and B are perfectly negatively correlated.

b. What is meant by coefficient of variation? Calculate coefficient of variation for shares in A and B and decide which of the two shares you would prefer to investment in and why? 

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