Determine the expected return and standard deviation

Reference no: EM1363685

Expected returns and standard deviation on stocks A and B are E(RA) = 0.15, E(RB) = 0.22, StdDevA = 0.10 and StdDevB = 0.23

Calculate the expected return and standard deviation of a portfolio that is composed of 35 percent A and 65 percent B when the correlation between the returns on A and B is 0.6

Calculate the expected return and standard deviation of a portfolio that is composed of 35 percent A and 65 percent B when the correlation between the returns on A and B is -0.6

How does the correlation between the returns on A and B affect the standard deviation of the portfolio?

Need help answering these questions:
a. What financial concept or principle is this problem asking you to solve?
b. What are some business decisions that a manager would be able to make after solving the problem?
c. Is there any additional information missing from the problem that would enhance the decision-making process?
d. Without showing mathematical calculations, explain in writing how you would solve the problem.

Reference no: EM1363685

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