FE445 Homework 03 Solutions

You put the rest of you money in a risky bond

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Unformatted text preview: 24%. You put the rest of you money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 12%. The stock and bond portfolio have a correlation 0.55. The expected return of the resulting portfolio will be ________% and the standard deviation _______%. E(r)=0.5(14%)+0.5(6%)=10% σ2p = 0.02592 = (.52)(.242) + (.52)(.122) + 2(.5)(.5)(.24)(.12)0.55; σ = 16.099% 4. The standard deviation of return on investment A is .10 while the standard deviation of return on investmen...
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