Stock a Has a Daily Volatility of 1

question 2

Short Answer

Stock A has a daily volatility of 1.2% and stock B has a daily volatility of 1.8%. The correlation between the two stock price returns is 0.2.
i) What is the standard deviation of the return from stock A over 4 days? _ _ _ _ _ _
ii) What is the standard deviation of the return from stock B over 4 days? _ _ _ _ _ _
iii) What is the standard deviation to the nearest $'000) of the 4-day change in the value of a portfolio consisting of a $1 million investment in stock A and a $1 million investment in stock B? _ _ _ _ _ _

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Definitions:

Watts

A unit of power in the International System of Units (SI) that measures the rate of energy transfer or conversion.

Cost Per kWh

The amount charged for every kilowatt-hour of electricity consumed, used to calculate electricity bills.

Watts

A unit of power in the International System of Units (SI), representing one joule per second, commonly used to measure electrical power.

Refrigerator

A household appliance used to keep food and drinks cold and to preserve them for a longer period.