eBook Problem 6 05 Given E ( R 1 ) 0 14 E ( R 2 ) 0 18 E ( 1 ) 0 03 E ( 2 ) 0 06 Calculate the expected returns and expected standard deviations of a two stock portfolio in which Stock 1 has a weight of 80 percent under the conditions given below Do not round intermediate calculations Round your answers for the expected returns of a two stock portfolio to three decimal places and answers for expected standard deviations of a two stock portfolio to four decimal places r 1,2 1 00 Expected return of a two stock portfolio Expected standard deviation of a two stock portfolio r 1,2 0 75 Expected return of a two stock portfolio Expected standard deviation of a two stock portfolio r 1,2 0 10 Expected return of a two stock portfolio Expected standard deviation of a two stock portfolio r 1,2 0 00 Expected return of a two stock portfolio Expected standard deviation of a two stock portfolio r 1,2 0 10 Expected return of a two stock portfolio Expected standard deviation of a two stock portfolio r 1,2 0 75 Expected return of a two stock portfolio Expected standard deviation of a two stock portfolio r 1,2 1 00 Expected return of a two stock portfolio Expected standard deviation of a two stock portfolio

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eBook Problem 6-05 Given: E ( R 1 ) = 0.14 E ( R 2 ) = 0.18 E ( 1 ) = 0.03 E

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Problem 6-05

Given:

	E(R₁) = 0.14
	E(R₂) = 0.18
	E(₁) = 0.03
	E(₂) = 0.06

Calculate the expected returns and expected standard deviations of a two-stock portfolio in which Stock 1 has a weight of 80 percent under the conditions given below. Do not round intermediate calculations. Round your answers for the expected returns of a two-stock portfolio to three decimal places and answers for expected standard deviations of a two-stock portfolio to four decimal places.

r_1,2 = 1.00
Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:
r_1,2 = 0.75
Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:
r_1,2 = 0.10
Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:
r_1,2 = 0.00
Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:
r_1,2 = -0.10
Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:
r_1,2 = -0.75
Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:
r_1,2 = -1.00
Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio: