Question

8) The EQT Equity Fund has an expected return Eſr) of 14.190% and a standard deviation o of 20%. The ZQR Bond Fund has and expected return E[r] of 7.510% and a standard deviation o of 10%. The correlation coefficient (p) is -0.12. A portfolio comprised of 69% EQT and 31% ZQR would have on of 20%. The Zar. Bond Fund has and expected returned an expected return of and a standard deviation of

Answer 1

	Expected return%=	Wt EQT*Return EQT+Wt ZQR*Return ZQR
	Expected return%=	0.69*0.1419+0.31*0.0751
	Expected return%=	12.12
	Variance	=( w2A*σ2(RA) + w2B*σ2(RB) + 2*(wA)*(wB)*Cor(RA, RB)*σ(RA)*σ(RB))
	Variance	=0.69^2*0.2^2+0.31^2*0.1^2+2*0.69*0.31*0.2*0.1*-0.12
	Variance	0.01898
	Standard deviation=	(variance)^0.5
	Standard deviation=	13.78%