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:

Common Shares

Equity securities that represent ownership in a company, providing voting rights and entitling shareholders to a share of the company's profits through dividends.

Intangible Assets

Non-physical assets such as copyrights, patents, trademarks, and goodwill that have value to a business.

Valuation Method

A technique used to determine the fair value of assets or liabilities, considering market conditions, income potential, and historical costs.

Net Capital Assets

The total value of a company's fixed assets less any accumulated depreciation, representing the actual worth of these assets in the company's balance sheet.