Homework Answers
Ans:*
Portfolio,P=0.4*A+0.6*B
Var(P)=0.4^2*Var(A)+0.6^2*Var(B)+2*0.4*0.6*Cov(A,B)
Now,
Cov(A,B)=Corr(A,B)*SD(A)*SD(B)=0.6*0.09*0.04=0.00216
Var(P)=0.4^2*0.09^2+0.6^2*0.04^2+2*0.4*0.6*0.00216
Var(P)=0.00291
SD(P)=sqrt(0.00291)=0.0539
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