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The expected return on a portfolio is simply a weighted average of the expected returns of the individual asset in the portfolio. Consider the following

The expected return on a portfolio is simply a weighted average of the expected returns of the individual asset in the portfolio. Consider the following portfolio of two assets where the correlation of returns of the assets is 0.1.

Stock

Portfolio weight

Expected Return

Standard Deviation

Correlation

Microsoft

0.4

12.0%

20%

10%

Coca-Cola

0.6

9.5%

12%

Calculate the expected return of the portfolio

Calculate the expected risk of the portfolio

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