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There are only two possible states of the economy. State 1 has a 73% chance of...

There are only two possible states of the economy. State 1 has a 73% chance of occurring. In State 1, Asset A returns 5.75% and Asset B returns 8.75%. In State 2, Asset A returns -3.30% and Asset B returns -6.30%. A portfolio of just these two assets is invested 37% in Asset A (with Asset B comprising the remainder without any negative weights). What is the standard deviation of the portfolio's returns?

Question 5 options:

5.27%

5.41%

5.55%

5.70%

5.84%

Solutions

Expert Solution

Ans is 5.70%

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jeff jeffy answered 1 year ago
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