Question
A portfolio consists of 70% of Security A (expected return of 0.20 and standard deviation of 0.03) and 30% of Security B (expected return of
A portfolio consists of 70% of Security A (expected return of 0.20 and standard deviation of 0.03) and 30% of Security B (expected return of 0.30 and standard deviation of 0.05) and the correlation coefficient between A and B is 0.0033.
a) Calculate the expected return and standard deviation of the portfolio.
b) Calculate the standard deviation of the portfolio if there was no diversification benefit. Explain this result compared to part a.
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International Financial Reporting Standards An Introduction
Authors: Belverd Needles, Marian Powers
2nd edition
053847680X, 978-1111793234, 1111793239, 978-0538476805
