2

23.8

8. You are considering three stocks for your portfolio.

Stock

Exp. Return

s

Correlation with A

Correlation with B

Correlation with C

A

.10

.40

  

.6

.4

B

.15

.20

.6

  

.3

C

.20

.30

.4

.3

  
  1. Your portfolio will consist only of 2 stocks. Which two do you choose? Why? (5 pts)

  2. You invest 50% of your money in each of the two stocks you chose. What is the expected return and standard deviation of your portfolio? (7 pts)


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