Consider two assets, A and B. A earns +4%, –5%, or +3%, in scenarios 1, 2,...

Consider two assets, A and B. A earns +4%, –5%, or +3%, in scenarios 1, 2, and 3. B earns –5%, +3%, or +4%, in scenarios 1, 2, and 3. Compute the expected rates of return and SD for each asset, A and B. Now, consider a portfolio of assets A and B called AB, where the investor holds fraction 62% of his portfolio in A and fraction (1-62%) in B. Compute the standard deviation of AB and report this as your answer. Compare the new standard deviation to that of each asset's individual standard deviation. What was the change in standard deviation between asset A and portfolio AB?

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I have calculated using manual calculation, with all formulas. Thank you

jeff jeffy answered 1 year ago

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