Suppose that there are only two stocks in the market and a risk free asset E(Ra)=18%...

 

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Suppose that there are only two stocks in the market and a risk free asset E(Ra)=18% , SD(Ra)=15% E(Rb) 12%, SD(Rb)=7%) COV(Ra,Rb)=0 Rf=5%, Supposed that you want to invest in a portfolio with E(Rp)=15%. a. Calculate the SD(Rp) b. Write down the portfolio's weights for each one of the securities you decided to invest in. Suppose that there are only two stocks in the market and a risk free asset E(Ra)=18% , SD(Ra)=15% E(Rb) 12%, SD(Rb)=7%) COV(Ra,Rb)=0 Rf=5%, Supposed that you want to invest in a portfolio with E(Rp)=15%. a. Calculate the SD(Rp) b. Write down the portfolio's weights for each one of the securities you decided to invest in.

Answer rating: 100% (QA)

To calculate the standard deviation SD of the portfolio SDRp we can use the formula for the portfolio variance SDRp sqrtwa2 SDRa2 wb2 SDRb2 2 wa wb CO... View the full answer