Question
An investment portfolio consists of two securities, X and Y. The weight of X is 30%. Asset X's expected return is 15% and the standard
An investment portfolio consists of two securities, X and Y. The weight of X is 30%.
Asset X's expected return is 15% and the standard deviation is 28%.
Asset Y's expected return is 23% and the standard deviation is 33%.
Assume the correlation coefficient between X and Y is 0.37.
A. Calcualte the expected return of the portfolio.
B. Calculate the standard deviation of the portfolio return.
C. Suppose now the investor decides to add some risk free assets into this portfolio.
The new weights of X, Y and risk free assets are 0.21, 0.49 and 0.30. What is the standard deviation of the new portfolio?
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Finance Introduction To Institutions Investments And Management
Authors: Ronald W. Melicher, Edgar A. Norton
12th Edition
0471675792, 9780471675792
