An investment portfolio consists of two securities, X and Y. The weight of X is 30%. Asset X's expected return is 15% and the standard deviation is 28%. Asset Y's expected return is 23% and the standard deviation is 33%. Assume the correlation coefficient between X and Y is 0.37. A. Calcualte the expected return of the portfolio. B. Calculate the standard deviation of the portfolio return. C. Suppose now the investor decides to add some risk free assets into this portfolio. The new weights of X, Y and risk free assets are 0.21, 0.49 and 0.30. What is the standard deviation of the new portfolio?

An investment portfolio consists of two securities, X and Y. The weight of X is 30%. Asset X's expected return is 15% and the standard deviation is 28%. Asset Y's expected return is 23% and the standard deviation is 33%. Assume the correlation coefficient between X and Y is 0.37. A. Calcualte the expected return of the portfolio. B. Calculate the standard deviation of the portfolio return. C. Suppose now the investor decides to add some risk free assets into this portfolio. The new weights of X, Y and risk free assets are 0.21, 0.49 and 0.30. What is the standard deviation of the new portfolio?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...

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