2. You have formed a portfolio of two securities. The portfolio weights, expected return, standard deviation...

2. You have formed a portfolio of two securities. The portfolio weights, expected return, standard deviation (SD) of the individual securities and the correlation between security 1 and 2 are as follows:

Security 1: weight = 1.4 , expected return = 15% , standard deviation = 25%,

Security 2: weight = -0.4, expected return = 5% , standard deviation = 5%

Correlation (1,2) = 0.85

Also, there is a market portfolio and the market portfolio's expected return is E(R)=10% and standard deviation (SD) is 20%.

Select a false statement.

• The standard deviation (SD) of the portfolio is 11.1%

• The expected return of the portfolio is 19%.

• If the correlation between market portfolio and Security 2 is -0.4, then the beta of Security 2 is -0.1.

• The standard deviation of the portfolio is 33.32%.

• If the correlation between market portfolio and Security 1 is 0.35, then the beta of Security 1 is 0.44.

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jeff jeffy answered 2 years ago

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