Download: Jamie Wong Solution

Download Solution : http://solutionzip.com/downloads/jamie-wong-solution/ Portfolio return and standard deviation Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%. The expected returns over the next 6 years, 2010–2015, for each of these stocks are shown in the following table: Expected return Year Stock L Stock M 2010 14% 20% 2011 14 18 2012 16 16 2013 17 14 2014 17 12 2015 19 10 a. Calculate the expected portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, , over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, rp, over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio. Download Solution : http://solutionzip.com/downloads/jamie-wong-solution/