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    Calculating Expected Return & Standard Deviation

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    Suppose a risk-free asset has a 5 percent return and a second asset has an expected return of 13 percent with a standard deviation of 23 percent. Calculate the expected portfolio return and standard deviation of a portfolio consisting of 10 percent of the risk-free asset and 90 percent of the second asset.

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    Weight of Risk free asset, A=wa=10%=0.10
    Weight of Second Asset B=wb=90%=0.90
    Expected return from asset A=E(Ra)=5%
    Standard deviation of stock A=sa=0% (As risk ...

    Solution Summary

    The solution describes the steps to calculate expected return and standard deviation of a portfolio consisting of a risk free asset and a asset with risk element.