Here are some historical data on the risk characteristics of Ford and Harley Davidson.

Ford Harley Davidson

Beta 1.36 0.87

Annual Standard Deviation of return (%)32.4 16.2

a) The correlation coefficient of Ford’s return versus Harley Davidson is 0.41. What is the standard deviation of a portfolio invested half in each share?

b) What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills?

Expert Solution

jeff jeffy answered 2 years ago

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