Chapter 11, Problem 27QAP

a

Summary Introduction

Adequate information:

Expected return for Security F $\left({\text{ER}}_{\text{F}}\right)$ = 0.1

Expected return for Security G $\left({\text{ER}}_{\text{G}}\right)$ = 0.13

Standard deviation of Security F $\left({\sigma }_{\text{F}}\right)$ = 0.53

Standard deviation of Security G $\left({\sigma }_{\text{G}}\right)$ = 0.79

Weight of Security F $\left({\text{W}}_{\text{F}}\right)$ = 0.40

Weight of Security G $\left({\text{W}}_{\text{G}}\right)$ = 0.60

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return expected on the investment portfolio.

b

Summary Introduction

Adequate information:

Correlation between Security F and G $\left({\text{ρ}}_{\text{F,G}}\right)$ = 0.35

To compute: Standard deviation of the portfolio.

Introduction: Standard deviation of the portfolio refers to the deviation in the actual prices and the average price.