Economics - Finance - Standard Deviation of Bond and Stock
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A portfolio contains $40,000 in bonds and $60,000 in stocks. The expected return on bonds is 7% with standard deviation of 1%. The expected return on the stocks is 12% with standard deviation of 8%. Assuming that the bonds and stocks are uncorrelated, determine the standard deviation of the above bond and stock portfolio.
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Solution Summary
This solution explains how to determine the standard deviation of a given bond and stock portfolio.
Solution Preview
Present value of the portfolio = 40000 + 60000 = 100000
Relative weight for Bonds = 40000/100000 = ...
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