Security F has an expected return of 10 percent and a standard deviation of 43 percent per year. Security G has an expected return of 15 percent and a standard deviation of 62 percent per year. a. What is the expected return on a portfolio composed of 30 percent of Security F and 70 percent of Security G? b. If the correlation between the returns of Security F and Security G is .25, what is the standard deviation of the portfolio described in part (a)?

Security F has an expected return of 10 percent and a standard deviation of 43 percent per year. Security G has an expected return of 15 percent and a standard deviation of 62 percent per year. a. What is the expected return on a portfolio composed of 30 percent of Security F and 70 percent of Security G? b. If the correlation between the returns of Security F and Security G is .25, what is the standard deviation of the portfolio described in part (a)?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13P

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Question 2 The expected returns and standard deviation of returns for two securities are as follows: Security Z Security Y Expected Return 15% 35% Standard Deviation 20% 40% The correlation between the returns is +0.25. a) Calculate the expected return and standard deviation for the following portfolios: i) All in Z ii) 0.75 in Z and 0.25 in Y iii) 0.5 in Z and 0.5 in Y iv) 0.25 in Z and 0.75 in Y v) All in Y b) Draw the mean-standard deviation frontier. c) Which portfolios might not be held by an investor who likes high expected return and low standard deviation?
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Problem 11-27 Portfolio Standard Deviation Security F has an expected return of 11.1 percent and a standard deviation of 44.1 percent per year. Security G has an expected return of 16.1 percent and a standard deviation of 63.1 percent per year. a. What is the expected return on a portfolio composed of 29 percent of Security F and 71 percent of Security G? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the correlation between the returns of Security F and Security G is .24, what is the standard deviation of the portfolio described in part (a)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return b. Standard deviation 14.65 60.91 %