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Example: Suppose you want to invest in one stock and one bond. The expected return and standard deviation of returns are presented in the table below. Suppose you want to invest 30 percent in the bond and 70 percent in the stock. What is the portfolio's expected return and standard deviation if the correlation between the two assets is 0.5, 0.2, -0.1?

Example: Suppose you want to invest in one stock and one bond. The expected return and standard deviation of returns are presented in the table below. Suppose you want to invest 30 percent in the bond and 70 percent in the stock. What is the portfolio's expected return and standard deviation if the correlation between the two assets is 0.5, 0.2, -0.1?

Intermediate Financial Management (MindTap Course List)
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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Example: Suppose you want to invest in one stock and one bond. The expected return and standard deviation of returns are presented in the table below. Suppose you want to invest 30 percent in the bond and 70 percent in the stock. What is the portfolio's expected return and standard deviation if the correlation between the two assets is 0.5, 0.2, -0.1? Asset Expected Return (%) Standard Deviation (%) Stock 9 16 Bond 3 12
Transcribed Image Text:Example: Suppose you want to invest in one stock and one bond. The expected return and standard deviation of returns are presented in the table below. Suppose you want to invest 30 percent in the bond and 70 percent in the stock. What is the portfolio's expected return and standard deviation if the correlation between the two assets is 0.5, 0.2, -0.1? Asset Expected Return (%) Standard Deviation (%) Stock 9 16 Bond 3 12
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