You have $400,000 invested in a well-diversified portfolio. You inherit a house that is presently worth $200,000.

Question:

You have $400,000 invested in a well-diversified You inherit a house that is presently worth $200,000. Consider the summary measures in the following table:
Investment Expected Return Standard Deviation
Old correlation coefficient between your and the house is 0.38.
a. What is the and the standard deviation for your comprising your old and the house?
b. Suppose you decide to sell the house and use the proceeds of $200,000 to buy risk-free T-bills that promise a 3% rate of return. Calculate the and the standard deviation for the resulting Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...