Question

Ch 5 #9: I already posted the question and half of the answer is wrong. Please help.

You have $390,000 invested in a well-diversified portfolio. You inherit a house that is presently worth $250,000 Consider the summary measures in the following table: 4.16 points Investment Old portfolio House Expected Return 8% 19% Standard Deviation 15x 27% The correlation coeffcient between your portfolio and the house is 0.48 a. What is the expected return and the standard deviation for your portfolio comprising your old portfolio and the house? (Do not round intermediate calculations. Round your final answers to 2 decimal places) [12:29 0 % [15.8875] O % Expected return Standard deviation b. Suppose you decide to sell the house and use the proceeds of $250,000 to buy risk-free T-bills that promise a 14% rate of return. Calculate the expected return and the standard deviation for the resulting portfolio [Hint Note that the correlation coefficient between any asset and the risk-free T-bills is zero ] (Do not round intermediate colculations. Round your final answers to 2 decimal places.) 10.3410% 13,95 x Expected return Standard devlation

Answer 1

Tono From that given data Total investment- in old portfolio is 390,000 henited hose is coorth is 250, 00D Weights are. go, 000 3go,00o+ 250, 000 *p HJ 250,000 kl 390,000+950, c00 WH 0.39 lhe port-fotio expected retem is