Consider the following probability distribution for stocks A and B: If you invest 35% of your money in A and 65% 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)10%; 1.7%
D)10%; 3%

Question

Consider the following probability distribution for stocks A and B:  If you invest 35% of your money in A and 65% 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)10%; 1.7% 
D)10%; 3%

Quizplus · Accepted Answer

E(R_P) = 0.35(13%) + 0.65(8.4%) = 10.01%; s_P = [(0.35)²(2.45%)² + (0.65)²(1.66)² + 2(0.35)(0.65)(2.45)(1.66)(0.590)]^1/2 = 1.7%.

Consider the Following Probability Distribution for Stocks a and B