Problem

You can form a portfolio of two assets, A and B, whose returns have the following characte...

You can form a portfolio of two assets, A and B, whose returns have the following characteristics:

Stock

Expected

Return

Standard

Deviation

Correlation

A

10%

20%

 

.5

B

15

40

If you demand an expected return of 12%, what are the portfolio weights? What is the portfolio’s standard deviation?

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Solutions For Problems in Chapter 7