Security expected return-variance-standard deviation

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Assume that an individual can either invest all of his resources in one of the two securities, A or B; or, alternatively, he can diversify his investment between the two. The distributions of the returns are as follows:

Security A                                                     Security B

Return            Probability                             Return            Probability

-10                   1/2                                           -20                   1/2

50                    1/2                                           60                    1/2

Assume that the correlation between the returns from the two securities is zero, and answer the following questions:

Calculate each security's expected return, variance and standard deviation.

Calculate the probability distribution of the returns on a mixed portfolio comprised of equal proportions of securities A and B. Also calculate the portfolio's expected return, variance and standard deviation.

Calculate the expected return and the variance of a mixed portfolio comprised of 75% of security A and 25% of security B.

Reference no: EM13911187

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