ou plan to deposit $5,900 at the end of each of the next 20 years into an account paying 10.8 percent interest. a. How much will
1 answer:
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Answer:
For correlation 1 the standard deviation of portfolio is 0.433.
For correlation 0 the standard deviation of portfolio is 0.3191.
For correlation -1 the standard deviation of portfolio is 0.127.
Explanation:
The standard deviation of a portfolio is computed using the formula:
(1)
For <em>r</em> = + 1 compute the standard deviation of portfolio as follows:
Thus, for correlation 1 the standard deviation of portfolio is 0.433.
(2)
For <em>r</em> = 0 compute the standard deviation of portfolio as follows:
Thus, for correlation 0 the standard deviation of portfolio is 0.3191.
(3)
For <em>r</em> = -1 compute the standard deviation of portfolio as follows:
Thus, for correlation -1 the standard deviation of portfolio is 0.127.