Assignment:
Analyzing portfolio risk and return involve the understanding of expected returns from a portfolio. Consider the following case: Andre is an amateur investor who holds a small portfolio consisting of only four stocks.The stock holdings in his portfolio are shown in the following table: Artemis (20% of portfolio, 6.00% expected return, 34.00% standard deviation) Babish & Co. (30% of portfolio, 14.00% expected return, 38.00% standard deviation) Cornell Industries (35% of portfolio, 12.00% expected return, 41.00 standard deviation) Danforth Motors (15% of portfolio, 3.00% expected return, 43.00% standard deviation) What is the expected return of Andre's stock portfolio?
a. 15.08,
b. 13.57,
c. 10.05
d. 7.54
Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (p=0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 39%, the portfolio's standard deviation most likely is ________ 39%.
a. equal to,
b. more than,
c. less than