Question

Suppose a portfolio manager wishes to construct a portfolio using two securities Coll and USR, both of their return data are shown in the Slide 5 with the title “Hypothetical Investment Alternatives”. Specifically, the manger allocates $60,000 in the Coll and $30,000 in the USR. Please calculate (1) Portfolio Expected Return (2) Portfolio Standard Deviation

Economy	Prob.	T-Bills	HT	Coll	USR	MP
Recession	0.1	5.5%	-27.0%	27.0%	6.0%	-17.0%
Below avg	0.2	5.5%	-7.0%	13.0%	-14.0%	-3.0%
Average	0.4	5.5%	15.0%	0.0%	3.0%	10.0%
Above avg	0.2	5.5%	30.0%	-11.0%	41.0%	25.0%
Boom	0.1	5.5%	45.0%	-21.0%	26.0%	38.0%

Please do not use excel.

Answer 1

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