Lambeth Walk invests 60 percent of his funds in stock I and the balance in stock J.

Question:

Lambeth Walk invests 60 percent of his funds in stock I and the balance in stock J. The standard deviation of returns on I is 10 percent, and on J it is 20 percent. Calculate the variance of portfolio returns, assuming

a. The correlation between the returns is 1.0.

b. The correlation is .5.

c. The correlation is 0.

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...