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An investor is evaluating a two asset portfolio containing the following two securities: Security Expected Return (%) Std Dev of Return (%) Boeing (U.S.) 18.6
An investor is evaluating a two asset portfolio containing the following two securities:
Security | Expected Return (%) | Std Dev of Return (%) |
Boeing (U.S.) | 18.6 | 22.8 |
Unilever (U.K.) | 16.0 | 24.0 |
If the two securities have a correlation of +.6, what is the expected return and standard deviation of return for a portfolio that is equally weighted?
Use the formulas rp = w1r1 + w2r2 and p 2 = w1 2 1 2 + w2 2 2 2 + 2w1w2r1212 to calculate the means and standard deviations of the portfolios.
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