Question
You have a portfolio where you have invested 25% of your money in the shares of Lance trucking and the remainder of your money's invested
You have a portfolio where you have invested 25% of your money in the shares of Lance trucking and the remainder of your money's invested in the shares of charter gas and oil. The expected rates of return of Lance stock and charter stock are 12% and 9% respectively. The standard deviations of returns of Lance stock and charter stock are 30% and 18% respectively. The correlation between Lance and Charter is -0.5.
What is the expected rate of return on your portfolio? What is the standard deviation of your portfolio? Do you believe that you have diversified risk in forming this portfolio?
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