Question

In: Finance

Your client has a two-asset portfolio with equal weighting and the following characteristics: Return Risk(σ) Asset...

  1. Your client has a two-asset portfolio with equal weighting and the following characteristics:

Return

Risk(σ)

Asset A

5%

20%

Asset B

10%

30%

If the correlation coefficient between assets A and B is 0.6, what is the standard deviation of the 2-assst portfolio?

Solutions

Expert Solution

Standard Deviation =

Standard Deviation = [ (20*0.50)2 + (30*0.50)2 + 2 * 0.50 * 0.50 * 0.6 * 20 * 30 ]1/2

                            = [ 100 + 225 + 180 ]1/2

                            = [ 505 ]1/2

                            = 22.47% Answer

jeff jeffy answered 1 year ago
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