The Expected Returns and Standard Deviations for Stocks a and B

question 13

Short Answer

The expected returns and standard deviations for stocks A and B are r_A=14% and r_B=19%, respectively, and $\sigma$ _A=23% and $\sigma$ _B=34%, respectively.The correlation of the returns on the two stocks is $\sigma$ _AB=0.3.What is the expected return, r_P, and standard deviation, $\sigma$ _P, of a portfolio with weights of w_A=0.60 and w_B=0.40 in stocks A and B, respectively?
$\begin{array}{ll}&1' \mathrm{P} & \sigma_{\mathrm{P}} \\a.&16 \% & 22.1 \% \\b.&16 \% & 24.8 \% \\c.&17 \% & 22.1 \% \\d.&17 \% & 24.8 \%\end{array}$

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Definitions:

Textbook Sales

The activity or business of selling educational books utilized primarily in schools and universities.

Adjusting Journal Entry

An accounting entry made in the general ledger at the end of an accounting period to record any unrecognized income or expenses, ensuring the accounts reflect the correct amounts.

Vendor

An entity or person that supplies goods or services to another company, often part of the supply chain.

Depreciation

The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.