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8. Calculate the PORTFOLIO Expected Return and standard deviation of a 60/40 Portfolio of Asset A and asset B. ASSET A 60% ASSET B 40%
8. Calculate the PORTFOLIO Expected Return and standard deviation of a 60/40 Portfolio of Asset A and asset B. ASSET A 60% ASSET B 40% Return in State Return in State R (A) R(B) PORTFOLIO Rport in Sate S R(P)i Deviation R(P)i Pr Portfolio (Deviation Portfolio 2 State S Squared Dev*Pr Pr State P 0.4 0.6 E(R) E(R) Portfolio Portfolio Var Portfolio sd - 9. Compare the Risk-Return of the two stocks ALONE and the joint risk in the portfolio Interpret your results. Stock Alone Portfolio 60A- 40B Asset A Asset B Expected Return Variance Standard Deviation Is diversification working or not? Why? What type of risk is addressed with portfolio allocation? Define correlation. Given your results, Assets A and B must be correlated close to what degree? (- 1.0.+1)? Why? 8. Calculate the PORTFOLIO Expected Return and standard deviation of a 60/40 Portfolio of Asset A and asset B. ASSET A 60% ASSET B 40% Return in State Return in State R (A) R(B) PORTFOLIO Rport in Sate S R(P)i Deviation R(P)i Pr Portfolio (Deviation Portfolio 2 State S Squared Dev*Pr Pr State P 0.4 0.6 E(R) E(R) Portfolio Portfolio Var Portfolio sd - 9. Compare the Risk-Return of the two stocks ALONE and the joint risk in the portfolio Interpret your results. Stock Alone Portfolio 60A- 40B Asset A Asset B Expected Return Variance Standard Deviation Is diversification working or not? Why? What type of risk is addressed with portfolio allocation? Define correlation. Given your results, Assets A and B must be correlated close to what degree? (- 1.0.+1)? Why
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