Question: There are 2 assets. Asset 1: Expected return 7.5%, standard deviation 9% Asset 2: Expected return 11%, standard deviation 12%, correlation with asset 1 is

There are 2 assets.

Asset 1: Expected return 7.5%, standard deviation 9%

Asset 2: Expected return 11%, standard deviation 12%, correlation with asset 1 is 0.4

You hold 30% of your portfolio in asset 1 and 70% in asset 2.

a) What is the expected return of your portfolio?

b) What is the covariance between assets 1 and 2?

c) What is the standard deviation of your portfolio?

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