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What are the expected return and standard deviation

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Consider two stocks: WMT and IBM with the following properties Stock E(r) β(r) WMT 8% 13% IBM 12% 20% The correlation of the two stock returns is ρWMT,IBM = 9% and the risk-free rate is rf = 1%. You are advising a client who has $1 million invested. Currently 50% of this money is in WMT and 50% is in IBM.

(a) What are the expected return and standard deviation of the return on your client's portfolio?

(b) You are told that the optimal efficient portfolio (P) formed with WMT and IBM has weights wWMT = 60% and wIBM = 40%.

i. What are the expected return and standard deviation of Portfolio P?

Reference no: EM132828486

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