Security F has an expected return of 12% and a standard deviation of 9% per year. Security G has an expected return of 18% and a standard deviation of 25% per year. A portfolio is composed of 30% of Security F and 70% of Security G? If the correlation coefficient between the returns of F and G is 0.2, what is the standard deviation of the portfolio?© BrainMass Inc. brainmass.com March 4, 2021, 9:05 pm ad1c9bdddf
Please see the attached file.
The variance of the portfolio equals:
s2P = (WF)2(sF)2 + (WG)2(sG)2 + (2)(WF)(WG)(sF)(sG)[Correlation(RF, RG)]
where s2P = the variance of the portfolio
WF = the weight of Security F in the ...
This posting provides a detailed and complete solution to the student's problem of calculating the standard deviation for a portfolio of two securities given their respective expected returns and standard deviations.