2. The expected returns and standard deviation of returns for two securities are as follows:
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The correlation between the returns is .25.
(a) Calculate the expected return and standard deviation for the following portfolios:
(i) All in Security 1
(ii) .75 in Security 1 and the rest in Security 2
(iii) .5 in Security 1 and the rest in Security 2
(iv) .25 in Security 1 and the rest in Security 2
(v) All in Security 2
(b) Draw the mean-standard deviation diagram.
(c) Which portfolios could be chosen from this group by some investor who likes high mean and dislikes variance?
(a) Standard Deviation Expected Return i) 20.00% 15.00% ii) 20.00% 20.00% iii)... View the full answer