Standard deviation of the return of the portfolio

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Reference no: EM131551049

An investor decides to create a portfolio of two stocks: Risky, Inc and Safe, Inc. Risky has an expected return of 15% and the standard deviation of its return is 7%. On the other hand, Safe, Inc. is not as risky. It has an expected return of 6% and the standard deviation of its return is 2%. The correlation coefficient of the two stock's return is -1.0. If the investor invests 50% in the Safe, Inc. stock and the rest in Risky, what are the expected return and standard deviation of the return of the portfolio? Is the portfolio more risky than Safe, Inc? Explain.

Reference no: EM131551049

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