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QUESTION
Investors will typically divide their wealth into several classes of assets. Then a portfolio forms. Example 7: You have $10,000 investment into...
Investors will typically divide their wealth into several classes of assets. Then a portfolio forms. Example 7: You have $10,000 investment into stocks A and B. Among the $10,000, $3,000 goes to stock A and $7,000 goes to stock B. Stock A"s return for the next year is rA and B is rB . You know E (rA) = 10% , A = 20% , E (rB ) = 4% , B = 2% and correlation = 0.4 . What is the expected return and standard deviation of your portfolio?
