Given the following information on securities E and F, calculate the expected return and standard deviation of returns on a portfolio consisting of 40% invested in E and 60% invested in F.
Security E Security F
Expected Return 12% 5%
Standard Deviation of Returns 10% 20%
Correlation coefficient of returns -0.50
A)13.5%;15%
B)13.8%;14.4%
C)13.8%;10.6%
D)13.5%;8.7%

Question

Quizplus · Accepted Answer

Rp = wₑ Rₑ + wf Rf
Rp = 0.40(12%) + 0.60(15%) = 13.8%
σp = [(.40)²(10)² + (.60)²(20)² + 2(.40)(.60)(-0.50)(10)(20)].⁵
= 10.6%

Given the Following Information on Securities E and F, Calculate