and 12%. The variance of return for A and B are 64 and 36. The correlation between the security return is 0.4. What is (a) standard deviation of the portfolio return, (b) What is the net benefit from diversification? (Hint: net benefit is in terms of reduction in standard deviation of portfolio return)

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
icon
Related questions
Question

Help sirr fast

Suppose you invest 60% of your funds in security A and 40% in B. Mean returns for A and B are 16%
and 12%. The variance of return for A and B are 64 and 36. The correlation between the two
security return is 0.4. What is (a) standard deviation of the portfolio return, (b) What is the net
benefit from diversification? (Hint: net benefit is in terms of reduction in standard deviation of
portfolio return).
Transcribed Image Text:Suppose you invest 60% of your funds in security A and 40% in B. Mean returns for A and B are 16% and 12%. The variance of return for A and B are 64 and 36. The correlation between the two security return is 0.4. What is (a) standard deviation of the portfolio return, (b) What is the net benefit from diversification? (Hint: net benefit is in terms of reduction in standard deviation of portfolio return).
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Recommended textbooks for you
MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman