Investment A has an expected return of 10% with a standard deviation of 3.5%. Investment B has an expected return of 6% with a standard deviation of 1.2%
If you invest equally in both investments, what is the expected return and standard deviation of your portfolio? What assumptions have you made?
E(A + B ) = 0.10 + 0.06 = 0.16
Assume the rates of return are independent, Var(A + B ) = Var(A ) + Var(B) = 13.69. Hence, ? of (A + B) = 3.7
Business
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