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Expected return and standard deviation for a portfolio

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Determine the expected return and standard deviation for a portfolio.

The expected return on Asset 1 is 10%

The expected return on Asset 2 is 15%

Assume the standard deviation for Asset 1 is 20%

Assume the standard deviation for Asset 2 is 30%

Assume the correlation between the two stocks is .5

Question 1: remembering that the standard deviation is the square root of the variance, what is the expected return and standard deviation of a portfolio consisting of 60% Asset 1 and 40% Asset 2?

Question 2: add a risk free asset that pays 2% with no risk/standard deviation. If you make a new portfolio that consists of 75% risk free asset and 25% in the risky 60/40 portfolio, what is the mean and standard deviation of the portfolio?

Must show work.

Reference no: EM132675776

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