Standard deviation of the new combined portfolio

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Assume that a company has an existing portfolio A with an expected return of 9% and a standard deviation of 3%. The company is considering adding an asset B to its portfolio. Asset B's expected return is 12% with a standard deviation of 4%.

Also assume that the amount invested in A is $700,000 and the amount to be invested in B is $200,000.

If the degree of correlation between returns from portfolio A and project B is zero, calculate:

a. The standard deviation of the new combined portfolio and compare it with that of the existing portfolio.

b. The coefficient of variation of the new combined portfolio and compare it with that of the existing portfolio.

Reference no: EM132460223

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