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The stock market of country A has an expected return of 5 percent, and a standard...

The stock market of country A has an expected return of 5 percent, and a standard deviation of expected return of 8 percent. The stock market of country B has an expected return of 15 percent and a standard deviation of expected return of 10 percent.Calculate the expected return of a portfolio that is half invested in A and half in B.

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Answer #1

Expected Return of country A's stock market(RA) = 5%

Weight of Country A's stock market in portfolio (WA) = 0.5

Expected Return of country B's stock market(RB) = 15%

Weight of Country B's stock market in portfolio (WB) = 0.5

Expected Return of the portfolio = WA * RA + WB * RB

Expected Return of the portfolio = (0.5* 5% ) +(0.5*15%)

Expected Return of the portfolio = 2.5% + 7.5% = 10%

Expected Return of the porfolio that is half invested in A and half in B is 10%

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