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Author Question: Elizabeth has decided to form a portfolio by putting 30 of her money into stock 1 and 70 into stock ... (Read 96 times)

sarasara

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on: Aug 1, 2018
Elizabeth has decided to form a portfolio by putting 30 of her money into stock 1 and 70 into stock 2 . She assumes that the expected returns will be 10 and 18, respectively, and that the standard deviations will be 15 and 24, respectively. Describe what happens to the standard deviation of the portfolio returns when the coefficient of correlation p decreases.

Question 2

Under certain conditions where n is large enough, you can approximate the ___________________ _ distribution using the ___________________ _ distribution.
 Fill in the blank(s) with correct word


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lorealeza

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Reply #1 on: Aug 1, 2018
Answer to Question 1

The standard deviation of the portfolio returns decreases as the coefficient of correlation decreases.

Answer to Question 2

binomial; normal


sarasara

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Reply 2 on: Aug 1, 2018
Great answer, keep it coming :)

ghepp

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Reply 3 on: Yesterday
Excellent

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