An investor can design a risky portfolio based on two funds, HighYieldBond and SmallCapStock. Fund HighYieldBond has an expected return of 20% and a standard deviation of return of 34%. Fund SmallCapStock has an expected return of 25% and a standard deviation of return of 38%. The correlation coefficient between the returns on HighYieldBond and SmallCapStock is 0.31. If an
An investor can design a risky portfolio based on two funds, HighYieldBond and SmallCapStock. Fund HighYieldBond has an expected return of 20% and a standard deviation of return of 34%. Fund SmallCapStock has an expected return of 25% and a standard deviation of return of 38%. The correlation coefficient between the returns on HighYieldBond and SmallCapStock is 0.31. If an
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
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An investor can design a risky portfolio based on two funds, HighYieldBond and SmallCapStock. Fund HighYieldBond has an expected return of 20% and a standard deviation of return of 34%. Fund SmallCapStock has an expected return of 25% and a standard deviation of return of 38%. The correlation coefficient between the returns on HighYieldBond and SmallCapStock is 0.31. If an investor puts 0.45 into fund HighYieldBond, what is the standard deviation of the return on this portfolio?
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