# The expected return on reebok is 20 the standard

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The expected return on Reebok is 20%. The standard deviation of Coca Cola stock is 31.5%. The standard deviation of Reebok stock is 58.5%. What is the expected return and standard deviation of your portfolio? Assume a correlation coefficient of 1. Portfolio Risk Example Suppose you invest 65% of your portfolio in Coca-Cola and 35% in Reebok. Assume a correlation coefficient of 1. The expected return on your portfolio is 10%*65% + 20%*35% = 13.50%. % 31.7 1,006.1 Deviation Standard 1 . 006 , 1 5) 1x31.5x58. 2(.65x.35x ] x(58.5) [(.35) ] x(31.5) [(.65) Valriance Portfolio 2 2 2 2 = = = + + = Portfolio Risk The shaded boxes contain variance terms; the remainder contain covariance terms. 1 2 3 4 5 6 N 1 2 3 4 5 6 N STOCK STOCK To calculate portfolio variance add up the boxes

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