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There are only two possible states of the economy. State 1 has a 43% chance of...

There are only two possible states of the economy. State 1 has a 43% chance of occurring. In State 1, Asset A returns 9.50% and Asset B returns 12.50%. In State 2, Asset A returns -4.80% and Asset B returns -7.80%. A portfolio of just these two assets is invested 67% in Asset A (with Asset B comprising the remainder without any negative weights). What is the standard deviation of the portfolio's returns?
options: 7.66%
7.86%
8.06%
8.26%
8.46%

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Expert Solution

The answer is 8.06%

jeff jeffy answered 1 year ago
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