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What is the standard deviation of returns of an equally weighted portfolio made up of Security A and Security B?

Security Return(S1)   Return(S2)

                       A                16%                 20%                   

                             B                12%                 25%                   

                        Risk-free asset return = 4%;

                        S1 is State-1 and S2 is State-2;

                                 Prob(S1) = 0.6; Prob(S2) = 0.4


What is the standard deviation of returns of an equally weighted portfolio made up of Security A and Security B?

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jeff jeffy answered 2 years ago
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