Financial Management - Assignment Example

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Summary

If the correlation coefficient was 0 or -0.5 then the investors risk is reduced by investing in the two stocks. This is because risk reduction occurs when the correlation coefficient is as close as possible to negative one.
c. A portfolio is a combination of different…

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Subject: Finance & Accounting
Type: Assignment
Level: Undergraduate
Pages: 4 (1000 words)
Downloads: 2
Author: umohr

Extract of sample "Financial Management"

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g a risk free asset with a risky asset will not improve the expected returns because the actual and the expected returns of the Treasury bills (risk free asset) are equal and therefore no deviations from the mean. b. Percival ltd could not do better by investing the same amount in the index fund since the correlation between bond portfolio and the index fund is 0.1 which is not close to -1 which is considered as the ideal point for risk reduction for an investor wishing to invest in different

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