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Standard Deviation and Return on Portfolios

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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 explains how to calculate the standard deviation and expected return on a portfolio.

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