Question: Consider the following data on returns (R), standard deviation (), and correlations (r) for stocks (asset 1), bonds (asset 2) and real estate (asset 3):

Consider the following data on returns (R), standard deviation (), and correlations (r) for stocks (asset 1), bonds (asset 2) and real estate (asset 3): R1 = 10%, 1 = 4%, R2 = 20%, 2 = 10%, R3 = 13%, 3 = 8%, r12 = 0.8, r13 =0.0, r23 = 0.5. What is the standard deviation of a portfolio that is invested 50% in stocks, 40% in bonds, and 10% in real estate?

8.10%

6.053%

7.05%

9.25%

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