Question

11 Security Fhas an expected return of 15.0 percent and a standard deviation of 19 percent per year. Security G has an expected return of 21.0 percent and a standard deviation of 44 percent per year. 6.25 а. points What is the expected return on a portfolio composed of 30 percent of security Fand 70 percent of security G? (Do not round the intermediate calculations. Round the final answer to 2 decimal places.) еВook Expected return of the portfolio Print b. References If the correlation between the returns of security Fand security G is 0.50, what is the standard deviation of the portfolio described in part (a)? (Do not round the intermediate calculations. Round the final answer to 2 decimal places.) Standard deviation

Answer 1

Date: I L Page no 217. Calculation's Grinen Security f Security Expected Return 15% 21% Standard Decreation 197. 44% @ Calculation of Expected Return of Parlfalis Grinen Weight of Security f = .30 (30%) Weight of Security G = 70 (70%) Expected Return - Weight of & Expected Return t Weight of & Expected Pations of Portfolio Security & of Security & Security be of Security 6. t. 70 X 21% = = 30 x 15% 19.20 % so Expected Return of Partfalia is 19.20 % 9.20

6) Standard deviation of Parfslis Standard Standard Decustiam & Weight of +/ Standard Deristian & Weight of Deviation of security & Security & af Security G Security G. - It 2x Standard Denistian & Standard x Weight & Weight x Correlation of Security & Demistion of Securty of security betureen of Security G & G security FAG =/(619x30)' + (44X370)+ 2x 19 x 44 x• 30 x:70 x 50 3 = 34.01 % So, Standard Deristian of Partialis is 34.01% 34.0L% AU I