Suppose you invest 30% of your money in Security A and the rest in Security B

What is the expected return of the portfolio? (20 points)

What is the portfolio beta? (20 points)

What is the portfolio variance? Compare it with A and B variances. Is the portfolio variance larger or smaller than either A or B variances and why?

(40 points)

What percentage of your portfolio variance comes from the interaction component of total risk? (20 points)

Security A 15% 0.25 1.3 Security B Expected return Standard Deviation Beta Correlation co efficient between A and B 0.17 1.1 0.5