Example: Suppose you want to invest in one stock and one bond. The expected return and standard deviation of returns are presented in the table below. Suppose you want to invest 30 percent in the bond and 70 percent in the stock. What is the portfolio's expected return and standard deviation if the correlation between the two assets is 0.5, 0.2, -0.1?
Example: Suppose you want to invest in one stock and one bond. The expected return and standard deviation of returns are presented in the table below. Suppose you want to invest 30 percent in the bond and 70 percent in the stock. What is the portfolio's expected return and standard deviation if the correlation between the two assets is 0.5, 0.2, -0.1?
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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Transcribed Image Text:Example: Suppose you want to invest in one stock and one bond. The
expected return and standard deviation of returns are presented in the
table below. Suppose you want to invest 30 percent in the bond and 70
percent in the stock. What is the portfolio's expected return and
standard deviation if the correlation between the two assets is 0.5, 0.2,
-0.1?
Asset Expected
Return (%)
Standard
Deviation (%)
Stock 9
16
Bond
3
12
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