The expected return of Flint is 19.0 percent, and the expected return of Buffalo is 24.0 percent. Their standard deviations are 13.0 percent and 21.0 percent, respectively. If a portfolio is composed of 40 percent Flint and the remainder Buffalo, calculate the expected return and the standard deviation of the portfolio, given a correlation coefficient between Flint and Buffalo of 0.35. (Round
The expected return of Flint is 19.0 percent, and the expected return of Buffalo is 24.0 percent. Their standard deviations are 13.0 percent and 21.0 percent, respectively. If a portfolio is composed of 40 percent Flint and the remainder Buffalo, calculate the expected return and the standard deviation of the portfolio, given a correlation coefficient between Flint and Buffalo of 0.35. (Round
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:The expected return of Flint is 19.0 percent, and the expected return of Buffalo is 24.0 percent. Their standard deviations are 13.0
percent and 21.0 percent, respectively. If a portfolio is composed of 40 percent Flint and the remainder Buffalo, calculate the expected
return and the standard deviation of the portfolio, given a correlation coefficient between Flint and Buffalo of 0.35. (Round
intermediate calculations to 4 decimal places, e.g. 31.2125 and final answers to 2 decimal places, e.g. 15.25%.)
The expected return
Standard deviation of portfolio
%
%
Calculate the standard deviation if the correlation coefficient is -0.35. (Do not round intermediate calculations. Round answer to 2 decimal
places, e.g. 15.25%.)
Standard deviation of portfolio
%
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