Continue to Assume That the Returns of the Four Stocks

question 173

Essay

Continue to assume that the returns of the four stocks are no longer independent of one another,and the correlations between all pairs of stock returns are as given in the second question.Now,suppose that this investor decides to place $20,000 each in stocks B and D,and $10,000 each in stocks A and C.Find the mean and standard deviation of the total amount that this investor earns in one year from these four investments.

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Definitions:

International Business

Commercial transactions that occur across country borders, including trade, investment, and operational activities.

Import/Export

The business of importing goods from foreign countries and exporting domestic goods to foreign countries.

Austerity

Austerity refers to strict economic policies aimed at reducing government deficits through spending cuts and tax increases.

Sovereign Debt Crisis

A situation where a country's government is unable to meet its debt obligations, leading to financial turmoil.