An investor invests 40% of his wealth in a risky asset with an expected rate of return of 0.13 and a variance of 0.03 and 70% in a T-bill that pays 6%. His portfolio's expected return and standard deviation are __________ and __________, respectively.
A) 0.114; 0.128
B) 0.087; 0.063
C) 0.295; 0.125
D) 0.088; 0.069

Question

Quizplus · Accepted Answer

The expected return of the portfolio is calculated as (0.4 * 0.13) + (0.6 * 0.06) = 0.088. The standard deviation is calculated as 0.4 * sqrt(0.03) = 0.069.

An Investor Invests 40% of His Wealth in a Risky