Stocks X and Y have expected returns of 12 percent and 20 percent, respectively. They have standard deviations of 0.15 for X and 0.3 for Y The correlation between the stocks is 0.3. Johnhas invested in a portfolio comprised of 35 percent in stock X and the remainder in Y.

Required:

2. Calculate the expected return and standard deviation of the portfolio
4. Advise John whether or not diversification has been achieved . Show calculations and give the reason for your answer 
6. Demonstrate with calculations how John could further reduce the risk of his portfolio.

Answer rating: 100% (QA)

To calculate the expected return and standard deviation of the portfolio well first find the weights ... View the full answer