Suppose Johnson& Johnson and Walgreen Boots Alliance have expected returns and volatilities shownhere, with a correlation of
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Suppose Johnson& Johnson and Walgreen Boots Alliance have expected returns and volatilities shownhere, with a correlation of 23%. Calculate (a)the expected return and (b)the volatility(standard deviation) of a portfolio that consists of a long position of $8,000in Johnson& Johnson and a short position of $3,000in Walgreens.
| Expected Return | Standard Deviation | |||
| Johnson& Johnson | 6.96.9% | 17.817.8% | ||
| Walgreens Boots Alliance | 9.69.6% | 20.720.7% |
|
a. Calculate the expected return.
The expected return is ________(Answer)(Round to one decimalplace.)
b. Calculate the volatility(standard deviation).The volatility is ______(Answer).(Round to one decimalplace.)
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