Raybrooks Co. stock has an annual return mean and standard deviation of 10 percent and 21 percent, respectively. Joi, Inc., stock has an annual return mean and standard deviation of 12 percent and 34 percent, respectively.
Your portfolio allocates equal funds to the Raybrooks Co.and Joi, Inc., stocks.
The return correlation between Raybrooks Co. and Joi, Inc., is 0. What is the smallest expected loss, in percentages, for your portfolio in the coming month with a probability of 2.5 percent?
(Note: Use 1.96 as the multiple in your probability statement.)