Security F has an expected return of 10 percent and a standard deviation of 44 percent per

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Security F has an expected return of 10 percent and a standard deviation of 44 percent per year. Security G has an expected return of 15 percent and a standard deviation of 65 percent per year.
a. What is the expected return on a portfolio composed of 70 percent of Security F and 30 percent of Security G?
b. If the correlation between the returns of Security F and Security G is .15, what is the standard deviation of the portfolio described in part (a)?

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Corporate Finance Core Principles and Applications

ISBN: 978-1259289903

5th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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