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Teena is considering investing in Stock A and stock B. She plans to invest $ 25,000...

Teena is considering investing in Stock A and stock B. She plans to invest $ 25,000 in the low risk stock and $ 50,000 in the high-risk stock. You have been given the following information about these two stocks in the table below:

Stock

A

B

E(R)

15%

10

?

25%

22%

Correlation between A and B

0.20

Based on the given information above, you are required to:

  1. Calculate the portfolio weights

  2. Calculate the portfolio return.

  3. Calculate the portfolio risk.

  4. Compare portfolio risk with the individual stock risks and identify the benefit of the


diversification of the portfolio.

Solutions

Expert Solution

jeff jeffy answered 2 years ago
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