Ch 08: Assignment - Risk and Rates of Return the possibility that an investment portfolio will not generate the investor

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Ch 08 Assignment Risk And Rates Of Return The Possibility That An Investment Portfolio Will Not Generate The Investor 1 (41.44 KiB) Viewed 33 times

Ch 08: Assignment - Risk and Rates of Return the possibility that an investment portfolio will not generate the investor's expected rate of return. Analyzing portfolio risk and return involves 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: Stock Artemis Inc Babish & Co Cornell Industries Danforth Motors Percentage of Portfolio 20% 309 Expected Return 8.0094 Standard Deviation 32.00 36.0096 14.00% 13.00 v 35% 15% 39.00% 5.00% 41.00% What is the expected return on Andre's stock portfolio? 14.99% 8.32% 16,65% 11.10% Suppose each stock in Andre's portfolio has a correlation coeffident of 0.40 (-0.40) with each of the other stocks. The market's average standard deviation is approximately 20%, and the weighted average of the risk of the individual securities in the partially diversified four-stock portfolio is 37% It 40 additional, randomly selected stocks with a correlation coefficient of 0.30 with the other stocks in the portfolio wete added to the portfolio, what effect would this have on the portfolio's standard deviation ()? It would gradually settle at approximately 20%. It would gradually settle at about 35% It would gradually settle at approximately 50% It would decrease gradually setting at about 0%