Question

Year Return on security A 2017 10% 2018 12% 2019 14% average return of security a...

Year

Return on security A

2017

10%

2018

12%

2019

14%

average return of security a is 12%

standard deviation of return for security A is 2%

Assume that security B has an average return of 16% and a standard deviation of return of 3.3%, and that correlation between security A and security B is -1. Calculate the average return and standard deviation of return for a portfolio 50% invested in security A and 50% invested in security B. Comment on the result.

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