You own a portfolio that has 35% invested in asset A, and 65% invested in asset B. Asset A's standard deviation is 12% and asset B's standard deviation is 18%. The correlation coefficient between the two assets is -0.7. The expected return on the portfolio is 13%. What is the portfolio standard deviation?

1. 8.5%
2. 9.3%
3. 7.2%
4. 15.3%

Solution Preview

Weight of A=p1=35%
Weight of B=p2=65%
Standard deviation of A=sigma 1=12%
Standard deviation of B=sigma ...

Solution Summary

Solution describes the steps to calculate the portfolio standard deviation.

... to reduce the variance of the negatively correlated stocks in a portfolio, proper weights ... Generally properly diversified portfolios reduces investor risk ...

... a. Calculate the expected return and standard deviation of a portfolio that is composed fo 35 percent A and 65 percent B when the correlation between ...

... the equation for CML, we can calculate the standard... return, E(r) is to be calculated However, since ... SML gives an equation that calculates the expected return ...

Calculating Risk Using Beta & Standard Deviation of Return. ... systematic risk - it is used to calculate the expected return for a stock or a portfolio. ...

Calculating mean, variance and standard deviation of returns. ... b. Calculate the standard deviation for the two ... You have $19,000 to invest in a stock portfolio. ...

... Solutions to given problems explain methodology to calculate standard deviation and coefficient of ... It also calculates portfolio beta and fair return. ...

... We then calculate Mean (Expected) return, standard deviation of ...Portfolio BC has a lower coefficient of ...Calculates expected return and standard deviation for ...