Correlation with Energy ETF Asset Expected Return Std. Dev. of Return Energy ETF 6.8% 21.2% 1.0...

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Correlation with Energy ETF Asset Expected Return Std. Dev. of Return Energy ETF 6.8% 21.2% 1.0...

			Correlation with Energy ETF
Asset	Expected Return	Std. Dev. of Return	Correlation with Energy ETF
Energy ETF	6.8%	21.2%	1.0
Technology ETF	12.4%	37.9%	0.34

Find the expected return and standard deviation for a portfolio that is 70% invested in the energy ETF and 30% in the technology ETF.

Select one:

a. Expected return = 8.5%, standard deviation = 21.5%

b. Expected return = 29.6%, standard deviation = 9.6%

c. Expected return = 21.5%, standard deviation = 8.5%

d. Expected return = 9.6%, standard deviation = 29.6%

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Answer 1

Answer #1

Expected Return = 0.70(0.068) + 0.30(0.124) = 8.5%

Expected Return = 8.5%

Standard Deviation = [(0.70)2(0.212)2 + (0.30)2(0.379)2 + 2(0.70)(0.30)(0.212)(0.379)(0.34)]1/2

Standard Deviation = 21.5%

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Answer 2

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