Problem 11-27 Portfolio Standard Deviation Security F has an expected return of 11.1 percent and a standard deviation of 44.1 percent per year. Security G has an expected return of 16.1 percent and a standard deviation of 63.1 percent per year. a. What is the expected return on a portfolio composed of 29 percent of Security F and 71 percent of Security G? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the correlation between the returns of Security F and Security G is .24, what is the standard deviation of the portfolio described in part (a)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Problem 11-27 Portfolio Standard Deviation Security F has an expected return of 11.1 percent and a standard deviation of 44.1 percent per year. Security G has an expected return of 16.1 percent and a standard deviation of 63.1 percent per year. a. What is the expected return on a portfolio composed of 29 percent of Security F and 71 percent of Security G? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the correlation between the returns of Security F and Security G is .24, what is the standard deviation of the portfolio described in part (a)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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:Problem 11-27 Portfolio Standard Deviation
Security F has an expected return of 11.1 percent and a standard deviation of 44.1 percent
per year. Security G has an expected return of 16.1 percent and a standard deviation of
63.1 percent per year.
a. What is the expected return on a portfolio composed of 29 percent of Security F and
71 percent of Security G? (Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. If the correlation between the returns of Security F and Security G is .24, what is the
standard deviation of the portfolio described in part (a)? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
a. Expected return
b. Standard deviation
14.65
60.91 %
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