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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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