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standard deviation of 25 percent per year

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Security F has an expected return of 12 percent and a standard deviation of 9 percent per year. Security G has an expected return of 18 percent and a standard deviation of 25 percent per year.

A. What is the expected return on a portfolio composed of 30 percent of security F and 70 percent of security G?
B. If the correlation between the returns of security F and security G is 0.2, what is the standard deviation of the portfolio described in part (a)?

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Solution Summary

The solution looks at the expected return and the standard deviation per year.

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Expected return on the portfolio = Weight of security F * return of security F ...

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