Problem 6-06

Given: E(R1) = 0.12

E(R2) = 0.17

E(1) = 0.03

E(2) = 0.04

Calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0.80 under the conditions given below. Do not round intermediate calculations. Round your answers to four decimal places.

w1 = 1.00

Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:

w1 = 0.70

Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:

w1 = 0.50

Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:

w1 = 0.30

Expected return of a two-stock portfolio:

Expected standard deviation of a two-stock portfolio:

w1 = 0.10

Expected return of a two-stock portfolio: Expected standard deviation of a two-stock portfolio: