An investor invests 60% of his wealth in a risky asset which has an expected return of 15% and a variance of 4% and 40% of his wealth in a risk-free security that pays 6% return. What is the expected return and standard deviation of the portfolio?
An investor invests 60% of his wealth in a risky asset which has an expected return of 15% and a variance of 4% and 40% of his wealth in a risk-free security that pays 6% return. What is the expected return and standard deviation of the portfolio?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 18P
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An investor invests 60% of his wealth in a risky asset which has an expected return of 15% and a variance of 4% and 40% of his wealth in a risk-free security that pays 6% return. What is the expected return and standard deviation of the portfolio?
A. 0% and 12.0%, respectively
B. 6% and 8.0%, respectively
C. 6% and 10.0%, respectively
D. 4% and 12.0%, respectively
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