You put half of your money in a stock portfolio that has an expected return of...

You put half of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 23%. You put the rest of your money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 11.3%. The stock and bond portfolios have a correlation of 0.42. What is the standard deviation of the resulting portfolio?

Expert Solution

	Stock	Bond
Expected return	14.00%	6.00%
SD	23.00%	11.30%

Coorelation co-efficient	0.42

weights are
Stock	50.00%
Bond	50.00%

	Expected return	Weight	Weight * Expected return
Stock	14.00%	50.00%	7.00%
Bond	6.00%	50.00%	3.00%
		Total	10.00%

So expected return is 10%


Calculation of standard deviation

The first step is to calculate the covariance:

COVAB = SDA × SDB × rAB, where rAB is the correlation coefficient between securities A and B.

Now, calculate the standard deviation for the portfolio:

[(SDA2 × WA2) + (SDB2 × WB2) + 2 (WA)(WB)(COVAB)]½


Let's calcualte the co-variance	=23% * 11.3% * 0.42
	0.010916

Now lets calculate the SD
SD portfolio=	((23%^2 * 50%^2)+(11.3%^250%^2)+(250%50%0.010916))^(0.5)
SD portfolio=	14.79%

jeff jeffy answered 3 years ago

You put half of your money in a stock that has an expected return of 14%...

You put half of your money in a stock that has an expected return of 14% and a standard deviation of 24%. You put the rest of your money in a bond that has an expected return of 6% and a standard deviation of 12%. The stock and bond have a correlation of .55. What is the variance of your portfolio? Enter your answer as a decimal, rounded to four decimal places. B)You are forming a Capital Allocation Line (CAL)...

You put 60% of your money in a stock portfolio that has an expected return of...

You put 60% of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 26%. You put the rest of your money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 11%. The stock and bond portfolios have a correlation of 0.36. The standard deviation of the resulting portfolio is %. Please enter your answer with TWO decimal points.

You put 70% of your money in a stock portfolio that has an expected return of...

You put 70% of your money in a stock portfolio that has an expected return of 14.75% and a standard deviation of 28%. You put the rest of you money in a risky bond portfolio that has an expected return of 4.25% and a standard deviation of 15%. The stock and bond portfolio have a correlation 0.35. a. Assume the risk–free rate is 2.00%. What is the stock weight in the tangency portfolio formed by creating the optimal risky portfolio...

You have $67000. You put 25% of your money in a stock with an expected return...

You have $67000. You put 25% of your money in a stock with an expected return of 12 %, $36000 in a stock with an expected return of 17%, and the rest in a stock with an expected return of 19%. What is the expected return of your portfolio? The expected return of your portfolio is __%.

You have $58,000. You put 17% of your money in a stock with an expected return...

You have $58,000. You put 17% of your money in a stock with an expected return of 12%, $35,000 in a stock with an expected return of 17%, and the rest in a stock with an expected return of 20%. What is the expected return of your portfolio? The expected return of your portfolio is %. (Round to two decimal places.)

4.) You have $55,000. You put 15% of your money in a stock with an expected...

4.) You have $55,000. You put 15% of your money in a stock with an expected return of 13%, $38,000 in a stock with an expected return of 15%, and the rest in a stock with an expected return of 23%. What is the expected return of your portfolio? 12.) The risk-free rate is 4.9% and you believe that theS&P 500's excess return will be 8.5% over the next year. If you invest in a stock with a beta of...

You are the manager of a portfolio of risky securities. Your portfolio has an expected return...

You are the manager of a portfolio of risky securities. Your portfolio has an expected return (E(rP)) of 12% and a standard deviation (P) of 18%. The risk free rate (rf) is 6%. The following two clients want to invest some portions of their investment budget in your portfolio and the balance in the risk free asset: Client 1 needs an expected return of 10% from her complete portfolio. Client 2 needs a complete portfolio with a standard deviation of...

You have a three-stock portfolio. Stock A has an expected return of 16 percent and a...

You have a three-stock portfolio. Stock A has an expected return of 16 percent and a standard deviation of 41 percent, Stock B has an expected return of 20 percent and a standard deviation of 46 percent, and Stock C has an expected return of 15 percent and a standard deviation of 46 percent. The correlation between Stocks A and B is .30, between Stocks A and C is .20, and between Stocks B and C is .05. Your portfolio...

You have a three-stock portfolio. Stock A has an expected return of 17 percent and a...

You have a three-stock portfolio. Stock A has an expected return of 17 percent and a standard deviation of 38 percent, Stock B has an expected return of 20 percent and a standard deviation of 56 percent, and Stock C has an expected return of 15 percent and a standard deviation of 38 percent. The correlation between Stocks A and B is 0.30, between Stocks A and C is 0.20, and between Stocks B and C is 0.05. Your portfolio...

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...

Question