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Question 1: R&r Stock J Dividends Stock Price Year 1 - $40.00 Year 2 $2.00 $49.50...

Question 1: R&r

Stock J	Dividends	Stock Price
Year 1	-	$40.00
Year 2	$2.00	$49.50
Year 3	$2.20	$53.20
Year 4	$2.40	$52.75
Year 5	$2.60	$55.80

Stock Fillion	Dividends	Stock Price
Year 1	-	$45.00
Year 2	$3.10	$51.05
Year 3	$3.20	$58.95
Year 4	$3.90	$57.92
Year 5	$4.05	$50.10

a) Find the following for Fillion and Jessica and a portfolio with 60% invested in Fillion and 40% in Jessica:

- Variance

- Standard Deviation

- Average Variance

- Average Standard Deviation

Find E(r).

b) Repeat (a) with 50% invested in each stock. Do we guess that the correlation coefficient will be closer to -0.95, 0.0, or 0.95?

c) If stocks are added at random, which of the following is true?

- Eventually portfolio variance will be reduced to 0

- Eventually portfolio variance will be reduced to a non-zero number and won’t decrease further

- Portfolio variance will stay constant

- Portfolio variance will increase with each added stock

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jeff jeffy answered 2 years ago

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