Question: Consider the following two risky assets: Expected return (%) Standard Deviation (%) Stock fund (S) 15 32 Bond fund (B) 9 23 The correlation coefficient

Consider the following two risky assets:

Expected return (%) Standard Deviation (%)

Stock fund (S) 15 32

Bond fund (B) 9 23

The correlation coefficient between the stock return and the bond return is 0.5.

Now construct a risky portfolio P in which WS=0.7 and WB=0.3

A. What is the expected return of the risky portfolio P?

B. What is the standard deviation of the risky portfolio P?

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