Thinking of combining your investment portfolios

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Suppose you and your spouse are thinking of combining your investment portfolios. Both portfolios have two assets (A and B). Variance of the asset A and B are 0.09 and 0.04, respectively, and covariance between the assets is 0.03. The expected return of asset A is 10% and the expected return of asset B is 7%. Suppose the riskless asset has an expected return of 3%. You have 75% invested in asset A, while your spouse has 55% invested in asset A. Value of your portfolio is $35,000 and value of your spouse’s portfolio is $30,000. What is the value of investments in both assets after combining the assets? What is the expected return and the standard deviation of the combined portfolio? Use matrix multiplication method to answer this part. Show all steps. What is the correlation between assets A and B?

Reference no: EM131609911

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