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Campbell's father holds just one stock, East Coast Bank (ECB), which he thinks is a very...

Campbell's father holds just one stock, East Coast Bank (ECB), which he thinks is a very low-risk security. Campbell agrees that the stock is relatively safe, but he wants to demonstrate that his father's risk would be even lower if he were more diversified. Campbell obtained the following returns data shown for West Coast Bank (WCB). Both have had less variability than most other stocks over the past 5 years. Measured by the standard deviation of returns, by how much would his father's historical risk have been reduced if he had held a portfolio consisting of 50% ECB and the remainder in WCB? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Year                   ECB                    WCB

2014                   20.00%               25.00%

2015                   -10.00%              15.00%

2016                   35.00%               -5.00%

2017                  -5.00%                 -10.00%

2018                   15.00%                35.00%

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jeff jeffy answered 11 months ago
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