Question: A B Risk free Expected Return 6% 23% 2% Standard Deviation 11% 28% 0% Covariance, Cov(r A ,r B ) -0.00462 Correlation Coefficient, A,B -15%

A

B

Risk free

Expected Return

6%

23%

2%

Standard Deviation

11%

28%

0%

Covariance, Cov(rA,rB)

-0.00462

Correlation Coefficient, A,B

-15%

E(rP) = wAE(rA) + wBE(rB)

p 2 = w A 2 A 2 + w B 2 B 2 + 2 w A w B C o v ( r A , r B )

S h a r p e r a t i o = r i s k p r e m i u m s t a n d a r d d e v i a t i o n

A. Suppose we invest 35% in A and 65% in B, what is the portfolio expected return?

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