Suppose you have the following data on two risky assets:
R¯1 = .17 1 Standard Deviation 1 = .25
R¯2 = .10 2 Standard Deviation 2 = .12
You plan to put 60% of your wealth in asset 1 and 40% of your wealth in asset 2.
Calculate the mean and the standard deviation of the resulting portfolio for values of the correlation equal to -1, 0, 0.2, 0.5 and 1. What is the maximum value of the standard deviation of the portfolio, and why?

Answer rating: 100% (QA)

ANSWER To calculate the mean and standard deviation of the resulting portfolio we need to use the fo... View the full answer