If you invest 35% of your money in A and 65% in B, what would be your portfolio's expected rate of return and standard deviation?
Consider the following probability distribution for stocks A and B:
A. 9.9%; 3%
B. 9.9%; 1.1%
C. 10%; 1.7%
D. 10%; 3%
C. 10%; 1.7%
E(RP) = 0.35(13%) + 0.65(8.4%) = 10.01%; sP = [(0.35)2(2.45%)2 + (0.65)2(1.66)2 +2(0.35)(0.65)(2.45)(1.66)(0.590)]1/2 = 1.7%.
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