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Unformatted text preview: Hard to compute STD = Sigma(Ri) = Sigma I = squire root of variance Interpretation the unit of measure - % Find the P E(Ri) = summation of Ps X Ri,s E(Rp) = summation of Ps X Rp,s E(Rp) = Summation of Wi X E(Ri) = [Wa X E(Ra)]+[Wb X E(Rb)] Rp,1 = (0.6 X .17) + (0.4 X 0.01) = 10.6% Rp,2 = (0.6 X .1) + (0.4 X 0.08) = 9.2% Rp,3 = (0.6 X -0.02) + (0.4 X 0.16) = 5.2% The STD of P of 1.897% shows that diversification give less risk than any of the individual stocks....
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This note was uploaded on 09/08/2010 for the course BUS 172A at San Jose State University .