Question: Consider two assets, A and B . A earns + 4 % , - 5 % , or + 3 % , in scenarios 1

Consider two assets, A and B. A earns +4%,-5%, or +3%,
in scenarios 1,2, and 3. B earns -5%,+3%, or +4%, in
scenarios 1,2, and 3. Each scenario is equally likely.
Compute the expected rates of return and SD for each
asset, A and B. Now, consider a portfolio of assets A and B
called AB, where the investor holds fraction 89% of his
portfolio in A and fraction (1-89%) in B. Compute the
standard deviation of AB. Compare the new standard
deviation to that of each asset's individual standard
deviation. What was the change in standard deviation
between asset A and portfolio AB? StDev(AB)- StDev(A)
Consider two assets, A and B. A earns +4%,-5%, or +3%,

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