The two stocks in your portfolio, X and Y, have independent returns, so the correlation between them, rXY is zero.Your portfolio consists of $50, 000 invested in Stock X and $50, 000 invested in Stock Y.Both stocks have an expected return of 15%, betas of 1.6, and standard deviations of 30%.Which of the following statements best describes the characteristics of your 2-stock portfolio?

Question

Quizplus · Accepted Answer

Since the stocks have independent returns with a correlation of zero, the portfolio's beta is the weighted average of the individual betas, which remains 1.6 due to equal investment and identical betas. The expected return is also the weighted average of the individual expected returns, which is 15%. Standard deviation considerations do not affect these calculations directly.

The Two Stocks in Your Portfolio, X and Y, Have