Security F has an expected return of 11.70 percent and a standard deviation of 44.70 percent per year. Security G has an expected return of 16.70 percent and a standard deviation of 63.70 percent per year.
a. What is the expected return on a portfolio composed of 23 percent of Security F and 77 percent of Security G? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Expected return %
b. If the correlation between the returns of Security F and Security G is .18, what is the standard deviation of the portfolio described in part (a)? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Standard deviation %
| Security F has an expected return of 11.70 percent and a standard deviation of 44.70 percent per year. Security G has an expected return of 16.70 percent and a standard deviation of 63.70 percent per year. |
| a. | What is the expected return on a portfolio composed of 23 percent of Security F and 77 percent of Security G? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Expected return | % |
| b. | If the correlation between the returns of Security F and Security G is .18, what is the standard deviation of the portfolio described in part (a)? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Standard deviation | % |
Related questions
The market portfolio has an expected return of 11.1 percent and a standard deviation of 21.1 percent. The risk-free rate is 4.1 percent.
| a. | What is the expected return on a well-diversified portfolio with a standard deviation of 8.1 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Expected return | % |
| b. | What is the standard deviation of a well-diversified portfolio with an expected return of 19.1 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | % |
References
eBook & Resources
| Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .086, E(RB) = .146, รยA = .356, and รยB = .616. |
| a-1. | Calculate the expected return of a portfolio that is composed of 31 percent Stock A and 69 percent Stock B when the correlation between the returns on A and B is .46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Expected return | % |
| a-2. | Calculate the standard deviation of a portfolio that is composed of 31 percent Stock A and 69 percent Stock B when the correlation between the returns on A and B is .46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | % |
| b. | Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on Stocks A and B is รขยย.46. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Standard deviation | % |
| Consider the following information about three stocks: |
| Rate of Return if State Occurs | ||||||||||||
| State of | Probability of | |||||||||||
| Economy | State of Economy | Stock A | Stock B | Stock C | ||||||||
| Boom | 0.20 | 0.28 | 0.40 | 0.56 | ||||||||
| Normal | 0.45 | 0.22 | 0.20 | 0.18 | ||||||||
| Bust | 0.35 | 0.00 | ? | 0.20 | ? | 0.48 | ||||||
| a-1 | If your portfolio is invested 30 percent each in A and B and 40 percent in C, what is the portfolio expected return? (Round your answer to 2 decimal places. (e.g., 32.16)) |
| Portfolio expected return | % |
| a-2 | What is the variance? (Do not round intermediate calculations and round your final answer to 5 decimal places. (e.g., 32.16161)) |
| Variance |
| a-3 | What is the standard deviation? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Standard deviation | % |
| b. | If the expected T-bill rate is 4.20 percent, what is the expected risk premium on the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16)) |
| Expected risk premium | % |
| c-1 | If the expected inflation rate is 3.80 percent, what are the approximate and exact expected real returns on the portfolio? (Round your answers to 2 decimal places. (e.g., 32.16)) |
| Approximate expected real return | % |
| Exact expected real return | % |
| c-2 | What are the approximate and exact expected real risk premiums on the portfolio? (Round your answers to 2 decimal places. (e.g., 32.16)) |
| Approximate expected real risk premium | % |
| Exact expected real risk premium | % |
