Question: Consider the following expected return, E(ri ), variance, i 2 , and correlation value, ij, for the three securities listed below: (Hint: calculate the standard

Consider the following expected return, E(ri ), variance, i 2 , and correlation value, ij, for the three securities listed below: (Hint: calculate the standard deviation for each stock first! ) Security E(ri ), i 2 12 13 23 1 .06 .04 .60 2 .12 .08 -.40 3 .18 .18 .20 a. What is the portfolio expected return for each of the following combinations: (i) W1 = .2, W2 = .4, W3 = .4. (ii) W1 = .3, W2 = .2, W3 = .5 b. What is the portfolio variance for each of the combinations in Part a?

How to calculate the standard deviation on each stock?

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