1. Calculate the standard deviation for this portfolio using three methods: (12 pts)
2. Use Formulas (5) and (6)
3. Use Formula (7) and (10)
4. Use Formula (8) and (11)

You can use either Excel or manually calculate returns, standard deviations, covariance, and correlation coefficient using the formulas illustrated on PowerPoint slides. However, you need to show the calculation procedures for all questions listed here. Only showing final answers will not get any credit. I strongly recommend you to manually calculate them and use Excel to verify your answers. Keep at least 4 decimal digits to the right of the decimal point for all calculations. Given Formulas for Final Exam One security: for security i (where n is the number of states of economy) E(Ri)=s=1n[psE(Ri,s)]Variance=i2=s=1n[ps(E(Ri,s)E(Ri))2]StandardDeviation=i=i2=s=1n[ps(E(Ri,s)E(Ri))2] Portfolio comprised of m securities: ( m is the number of securities &n is the number of the states of economy) E(RP)=i=1m[wiE(Ri)] For each state of economy (s=1,2,n), get E(Rp,s)=i=1mwiE(Ri,s) p=s=1n[ps(E(Rp,s)E(RP))2] Covariance of two securities, 1 and 2: Cov(R1,R2)=s=1nps[E(R1,s)E(R1)][E(R2,s)E(R2)] Correlation coefficient of two securities, 1 and 2: Corr(R1,R2)=12=12Cov(R1,R2) Two-Risky-Assets Portfolio with two securities 1 and 2: E(RP)=w1E(R1)+w2E(R2)p=(w11)2+(w22)2+2w1w2Cov(R1,R2)p=(w11)2+(w22)2+2w1w212Corr(R1,R2)w1(min)=12+2221212221212w1(optimal)=[E(R1)rf]22+[E(R2)rf]12[E(R1)rf+E(R2)rf]1212[E(R1)rf]22[E(R2)rf]1212