And correlation with the natasha fund

Berk & DeMarzo 4th Global Edition

• Mathematics of Diversification

• Correlation and Efficient Portfolios 11.4

• Risk Free Rate and Capital Allocation Line 11.5

Returns and weights Chapter 11 problem 1

Two stocks Chapter 11 problem 10

b. You follow your broker’s advice and make a substantial investment in Hannah stock so that, considering only your risky investments, 60% is in the Natasha Fund and 40% is in Hannah stock. When you tell your finance professor about your investment, he says that you made a mistake and should reduce your investment in Hannah. Is your finance professor right? c. You decide to follow your finance professor’s advice and reduce your exposure to Hannah. Now Hannah represents 15% of your risky portfolio, with the rest in the Natasha fund. Is this the correct amount of Hannah stock to hold?