a b Expected return 0.1 0.08 SD 0.06 0.05 investment weight 0
|
a |
b |
|
|
Expected return |
0.1 |
0.08 |
|
SD |
0.06 |
0.05 |
|
investment weight |
0.3 |
0.7 |
|
covariance |
0.0008 |
|
|
0.086 |
||
|
0.586436 |
||
|
0.765791094 |
=0.3*0.1+0.7*0.08 = 0.086
=(0.3^2)+(0.06^2)+(0.7^2)+(0.05^2)+2*0.3*0.7*0.0008= 0.5866436
=SQRT (0.5866436) = 0.76579109
************PLEASE CHECK MY WORK*******
Homework Answers
Expected return calculated is correct, but there is a small mistake in portfolio standard deviation
Standard deviation of a portfolio is
using formula
Sqrt(0.3^2)*(0.06^2)+(0.7^2)*(0.05^2)+2*0.3*0.7*0.0008 = sqrt(0.001885) = 0.043417
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