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You can form a portfollio of two assets, A and B, whose retums have the following characteristics Expected Retum 9% Standard Deviation 29% 17 45 a. lf you demand an expected return of 15%, what are the portfolio weights? Do not round intermediate calculations. Round your answers to 3 decimal places) Stock Portfolio Weight b. What is the portfolios standard deviation? (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places Standard deviation
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Expected Return 9.00% 17.00% Standard Deviation 29.00% 45.00% Correlation Asset A Asset B Expected Return [r] 15.00% Formula => r= XaRa + XbRb Xa and Xb are the proportion of wealth invested in A and B respectively We now replace Xb with 1 - Xa 0.15 Xa (.09) +(1- Xa) (0.17) On solving, the equation, we get Xa 0.25 Xb = 0.75 Variance of the portfolio is defined as under Plotting the numbers in the above equation o23(0.25) (29) + (0.75) (45) +2(0.25) (0.75) (0.3) (29) (45)) And the standard deviation is square root of 1338.44 1,338.44 36.58% a) Stock Portfolio weight 0.25% 0.75% b) Standard deviation is 36.58%

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