You invest 47% of your money in Stock A and the rest in Stock B. The standard deviation of annual returns is 72% for Stock A and 72% for Stock B. The correlation between the two stocks is 0.3. By how many percentage points does diversifying between these two stocks reduce your risk? Correct answer 0.139
You invest 47% of your money in Stock A and the rest in Stock B. The standard deviation of annual returns is 72% for Stock A and 72% for Stock B. The correlation between the two stocks is 0.3. By how many percentage points does diversifying between these two stocks reduce your risk? Correct answer 0.139
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 1P: The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market...
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