Question

Consider a portfolio consisting of the following two assets:  Stock A has E[RA] = 10%...

Consider a portfolio consisting of the following two assets:

 Stock A has E[RA] = 10% and ?? = 20%

 Stock B has E[RB] = 20% and ?? = 40%

Calculate the expected return and standard deviation of the portfolio under the four following sets of assumptions:

(a) wA = 1/2 and wB = 1/2 and ???= 0

(b) wA = 1/2 and wB = 1/2 and ???= -1

(c) wA = 2/3 and wB = 1/3 and ??? = 0

(d) wA = 2/3 and wB = 1/3 and ??? = -1

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Answer #1

The expected return of the portfolio

Standard deviation

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