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.
A) 13.5%; 15%
B) 13.8%; 14.4%
C) 13.8%; 10.6%
D) 13.5%; 8.7%

Question

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. 
A) 13.5%; 15% 
B) 13.8%; 14.4% 
C) 13.8%; 10.6% 
D) 13.5%; 8.7%

Quizplus · Accepted Answer

Solution: R_p = w_e R_e + w_f R_f R_p = 0.40 (12%) + 0.60 (15%) = 13.8% σ_p = [(.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