Question

6. Firm X's common stock has an expected return of .15 and a standard deviation of 0.20. Firm Y's common stock has an expected return of 0.18 and a standard

deviation of .24. The correlation coefficient between the two firms is .60. You have a portfolio that has $3000 invested in Firm X and $7500 in Firm Y. a. What was the general equation that resulted in the following specific equation: .286 =3000/(3000 +7500) b. What was the general equation that resulted in the following specific equation: .171 = .714(.18) + .286(.15) c. What was the general equation that resulted in the following specific equation: .228= .286(.20) + .714(.24) d. What would be the specific equation used to calculate the standard deviation of the portfolio?

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