Given the following information on securities E and F, calculate the expected re

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.                                                         security e                 security f
• Expected return                                            12%                       15%                                          
• standard deviation of returns                          10%                      20%
• correlation coefficient of returns                                 -0.50
  • 13.8%; 14.4%
  • 
    
  • 13.5%; 15%
  • 
    
  • 13.8%; 10.6%
  • 
    
  • 13.5%; 8.7%

Explanation / Answer

expected return= 40%*12%+60%*15%=13.8%

standard deviation=1/2(40*40*10*10+60*60*20*20+2*40*10*60*20*-0.50)=10.6%

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