Question: Three securities have the following expected returns: X = 10%, Y = 18% and Z = 25%. (a) Calculate the expected return for a portfolio

Three securities have the following expected returns: X = 10%, Y = 18% and Z = 25%.

(a) Calculate the expected return for a portfolio consisting of all three securities if equal amounts are placed in each security.

(b) Assume that the standard deviations for these three securities are, respectively, 12%, 14%, and 18%. The correlation coefficients are as follows: between XY = +0.6, between YZ = +0.2 and XZ = -0.3. Assuming equal weights, calculate the standard deviation for the portfolio.

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