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Find out the expected return and standard deviation

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The Bank of Tinytown has three loans that have the following characteristics. If the covariance between A and C is approximately 0.100 and the covariance between Loan B and Loan C is approximately 0.065, what are the expected return and standard deviation of this portfolio? Given the covariances, can the calculation be simplified? What will the risk of the portfolio be, given the simplification?

 

Loan Size ($ millions)

Return (%)

Variance (%)

Loan A

$ 500.0

11.0

10.6

Loan B

$ 1,600.0

7.50

5.0

Loan C

$ 800.0

12.0

9.5

Reference no: EM133113826

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