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Unformatted text preview: proportion oF very satisfed people. STA103 Project 3 2. Volatility of a Portfolio of Two Stocks (a) One can achieve volatility of 0.0105 in two ways. One can set = . 89 or = . 44 and either gives the value 0.0105. These can be read from a good graph or determined numerically. 0.0 0.2 0.4 0.6 0.8 1.0 0.0100 0.0105 0.0110 0.0115 0.0120 0.0125 0.0130 Graph of Portfolio Volatility Portfolio Volatility (b) The two choices of give diFerent expected returns. Since IBM has the higher expected return, the better portfolio is the one that puts more weight in IBM, so this gives = . 89 and a portfolio return of . 00140 = . 89 . 001402 + . 11 . 001365. (c) No, the volatility curve does not go as low as 0.010....
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 Spring '08
 Dinwoodie
 Statistics, Probability

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