Consider the following probability distribution for stocks A and B: The expected rate of return and standard deviation of the global minimum variance portfolio, G, are __________ and __________, respectively.
A)10.07%; 1.05%
B)8.97%; 2.03%
C)10.07%; 3.01%
D)8.97%; 1.05%

Question

Consider the following probability distribution for stocks A and B:  The expected rate of return and standard deviation of the global minimum variance portfolio, G, are __________ and __________, respectively.
A)10.07%; 1.05% 
B)8.97%; 2.03% 
C)10.07%; 3.01% 
D)8.97%; 1.05%

Quizplus · Accepted Answer

E(R_G) = 0.23(13.2%) + 0.77(7.7%) = 8.965%; s_G = [(0.23)²(1.5)² + (0.77)²(1.1)² + (2)(0.23)(0.77)(1.5)(1.1)(0.46)]^1/2 = 1.05%.

Consider the Following Probability Distribution for Stocks a and B