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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