An investment portfolio consists of two securities, X and Y. The weight of X is 30%. Asset X's expected return is 15% and the standard deviation is 28%. Asset Y's expected return is 23% and the standard deviation is 33%. Assume the correlation coefficient between X and Y is 0.37. A. Calcualte the expected return of the portfolio. B. Calculate the standard deviation of the portfolio return. C. Suppose now the investor decides to add some risk free assets into this portfolio. The new weights of X, Y and risk free assets are 0.21, 0.49 and 0.30. What is the standard deviation of the new portfolio?

An investment portfolio consists of two securities, X and Y. The weight of X is 30%. Asset X's expected return is 15% and the standard deviation is 28%. Asset Y's expected return is 23% and the standard deviation is 33%. Assume the correlation coefficient between X and Y is 0.37. A. Calcualte the expected return of the portfolio. B. Calculate the standard deviation of the portfolio return. C. Suppose now the investor decides to add some risk free assets into this portfolio. The new weights of X, Y and risk free assets are 0.21, 0.49 and 0.30. What is the standard deviation of the new portfolio?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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