f. Suppose you create a two-stock portfolio by investing $50,000 in Alta Industries and $50,000 in Repo
Men. Calculate the expected return, standard deviation, coefficient of variation, and beta for this
portfolio. How does the risk of this two-stock portfolio compare with the risk of the individual
stocks if they were held in isolation?
Barney Smith Investment Advisors recently issued estimates for the state of the economy and the rate of
return on each state of the economy. Alta Industries, Inc. is an electronics firm; Repo Men Inc. collects past
due debts; and American Foam manufactures mattresses and various other foam products. Barney Smith
also maintains an "index fund" which owns a market-weighted fraction of all publicly traded stocks; you
can invest in that fund and thus obtain average stock market results. Given the situation as described,
answer the following questions.
15% Expected rate of return
15% Standard deviation
1.00 Coefficient of variation =