Consider the following probability distribution for stocks A and B: If you invest 40% of your money in A and 60% in B, what would be your portfolio's expected rate of return and standard deviation
A)9.9%; 3%
B)9.9%; 1.1%
C)11%; 1.1%
D)11%; 3%
E)None of the options

Question

Consider the following probability distribution for stocks A and B:  If you invest 40% of your money in A and 60% in B, what would be your portfolio's expected rate of return and standard deviation
A)9.9%; 3% 
B)9.9%; 1.1% 
C)11%; 1.1% 
D)11%; 3% 
E)None of the options

Quizplus · Accepted Answer

E(R_P) = 0.4(13.2%) + 0.6(7.7%) = 9.9%; s_P = [(0.4)²(1.5)² + (0.6)²(1.1)² + 2(0.4)(0.6)(1.5)(1.1)(0.46)]^1/2 = 1.1%.

Consider the Following Probability Distribution for Stocks a and B