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Suppose you observe the following for two securities (X & Y) Outcome probability rate of return X RATE OF RETURN Y 1 0.2 12 14

Suppose you observe the following for two securities (X & Y)

Outcome probability rate of return X RATE OF RETURN Y
1 0.2 12 14
2 0.15 6 12
3 0.25 2 14
4 0.4 10 10

a) Calculate the expected return of portfolio with 40% in asset X and 60% in asset Y. [4 ]

b) Calculate the risk of this portfolio, assume Covxy = 1.

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