As a portfolio manager you are provided with the below information relating to the risk and return
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Question:
As a portfolio manager you are provided with the below information relating to the risk and return of 2 stocks namely Stock X and Y:
• The expected returns of X and Y are E[RX] = 10% and E[RY] = 15%.
• The volatilities of the returns are σX =18% and σY = 20%.
• The correlation coefficient of the returns for these two stocks is 0.25.
• The expected return for a portfolio, consisting of stocks X and Y, is 12%.
(a) You are required to calculate the volatility of the portfolio return.
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