The table below shows standard deviations and correlation coefficients for seven stocks from different countries. Calculate...

The table below shows standard deviations and correlation coefficients for seven stocks from different countries. Calculate the variance of a portfolio with equal investments in each stock. (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Round your answer to 4 decimal places.)
Portfolio Varience:?

	BHP Billiton	Siemens	Nestlé	LVMH	Toronto Dominion Bank	Samsung	BP
BHP Billiton	1.00	0.28	0.37	0.40	0.16	0.40	0.14
Siemens		1.00	0.34	0.16	0.14	0.31	–0.12
Nestlé			1.00	0.09	0.10	0.02	0.10
LVMH				1.00	0.33	0.51	–0.07
Toronto Dominion Bank					1.00	0.10	–0.10
Samsung						1.00	–0.09
BP							1.00
Standard deviation (%)	25.00	36.80	47.80	23.30	17.00	37.50	45.40

Solutions

Expert Solution

Portfolio variance can be calculated using the MMULT() function of excel, as follows:

There are seven assets equally weighted so weight per asset = 1/7 = 14.29%

Portfolio variance = 0.0324

Note: The correlation matrix is symmetrical across the diagonal so both halves of the matrix are same.

Formulas:

jeff jeffy answered 1 year ago

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