Suppose that Peter created his investment portfolio allocating 60% of his funds in Facebook (Meta Platforms Inc) shares and 40% in General Electric Co shares.

The average annual return rate on a Facebook stock is 0.39 and the variance of the returns on the stock is 0.16. A General Electric stock has an average return rate of 0.09 per year and a variance of 0.07.

a) Denote the annual return rate on Facebook shares by X and the annual return rate on General Electric shares by Y and use them to express the rate of return on Peter's portfolio.

rate of return on Peter's portfolio=Answer

b) Find the expected value of the rate of return on Peter's portfolio.

expected value of the return (enter with three decimal points): Answer

c) Find a standard deviation of the rate of return on Peter's portfolio (assume that the stock returns of companies are independent).

standard deviation of the return

Answer rating: 100% (QA)

a The rate of return on Peters portfolio can be expressed as a weighted average of the individual ra... View the full answer