You are forming a portfolio with two stocks. The first stock has an expected return of...

You are forming a portfolio with two stocks. The first stock has an expected return of 15% and a standard deviation of 20%. The second stock has an expected return of 10% and a standard deviation of 15%. The two stocks have a correlation of 0.5. If you want to form the portfolio by investing $1000 in the first stock and $3000 in the second stock, what is the expected return and standard deviation of the portfolio? Lastly, use the information provided (and your calculations) to show that diversification works.

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jeff jeffy answered 1 year ago

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