Stock A has a return variance (that is σ2) of 0.02. The market portfolio has a return variance of 0.03. The covariance between stock A’s return and market portfolio’s return is 0.01. Stock A has an expected return of 0.09, while the market has an expected return of 0.12. What is the expected return and standard deviation of a portfolio that is 65% invested in A and 35% invested in the market portfolio? a. ER = 10.1%, σ = 12.9% b. ER = 10.8%, σ = 16.7% c. ER = 10.1%, σ = 16.7% d. ER = 9.0%, σ = 12.9% e. ER = 8.5%, σ = 10.1%

Stock A has a return variance (that is σ2) of 0.02. The market portfolio has a return variance of 0.03. The covariance between stock A’s return and market portfolio’s return is 0.01. Stock A has an expected return of 0.09, while the market has an expected return of 0.12. What is the expected return and standard deviation of a portfolio that is 65% invested in A and 35% invested in the market portfolio? a. ER = 10.1%, σ = 12.9% b. ER = 10.8%, σ = 16.7% c. ER = 10.1%, σ = 16.7% d. ER = 9.0%, σ = 12.9% e. ER = 8.5%, σ = 10.1%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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