Calculate the expected rate of and the standard deviation return of the portfolio
You are considering a portfolio consisting of equal investments in the stocks Northbank Inc. and Tropical Escapes Inc. Returns on the 2 stocks under various conditions are shown below.
Scenario Return (%) Return % Return %
Probability Northbank Tropical Portfolio
0.20 4% 16%
0.50 10% 10%
0.30 20% -10%
Answer: In every scenario, the return on the portfolio is 10% so the expected return must also be 10% and the standard deviation is 0%.
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