1 A portfolio is constructed from ten stocks. The stocks each contribute equally to the overall value of the portfolio. The volatility of the portfolio is equal to 0.227. Consider the covariance matrix for the annual returns of the ten stocks. The sum of the values appearing in the covariance matrix that correspond to pairs of DISTINCT stocks is equal to 3.96. Find the average of the variances of the returns of the ten stocks. abcde- 0.1193 0.1121 0.0907 0.0907 0.01050 2-The table below provides the covariance matrix for the returns of three stocks: Stock A, Stock B, and Stock C. Two portfolios are created from the three stocks as follows: Portfolio X is created by investing equally in Stock A and Stock B, and Portfolio Y is created by investing equally in Stock A and Stock C. Find the correlation between the returns of the two portfolios. Stock A Stock B Stock C A 0.6164 B 0.6513 C 0.7211 D 0.5816 E 0’6862 Stock A 0.160 0.012 –0.100 Stock B 0.012 0.090 0.068 Stock C –0.100 0.068 0.250
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