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Suppose an investor creates a three asset portfolio combined of stock X, stock Y, and the risk-free asset. The investor puts 60% in Stock X,
Suppose an investor creates a three asset portfolio combined of stock X, stock Y, and the risk-free asset. The investor puts 60% in Stock X, 30% in Stock Y, and 10% in the risk free rate. Calculate the standard deviation on the portfolio. (Enter percentages as decimals and round to 4 decimals)
Prob(State) | X | Y | |
Boom | 50% | 12% | 8% |
Normal | 15% | 6% | -5% |
Bust | 35% | -3% | 3% |
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