Consider two risky securities A and B, as well as a risk-free bond. Their average returns and standard deviations are presented in the table below. The correlation between the Securities A and B is 0.3. Average Return Standard Deviation Security A 8% 12% Security B 13% 20% Risk-free bond 5% 0% a) What is the average return and standard deviation of an equally-weighted portfolio in A and B?
Consider two risky securities A and B, as well as a risk-free bond. Their average returns and standard deviations are presented in the table below. The correlation between the Securities A and B is 0.3. Average Return Standard Deviation Security A 8% 12% Security B 13% 20% Risk-free bond 5% 0% a) What is the average return and standard deviation of an equally-weighted portfolio in A and B?
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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Consider two risky securities A and B, as well as a risk-free bond. Their average returns and standard deviations are presented in the table below. The correlation between the Securities A and B is 0.3.
Average Return Standard Deviation
Security A 8% 12%
Security B 13% 20%
Risk-free bond 5% 0%
a) What is the average return and standard deviation of an equally-weighted portfolio in A and B?
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