What is the expected return on the equal-weighted portfolio

Reference no: EM132195924

Question - Consider investing money into two stocks. Suppose they have expected returns next year of 10% and 20%, respectively. Assume further that they have standard deviations of 15% and 25%, with a correlation of 50%.

a. What is the expected return on the equal-weighted portfolio?

b. How do you get a portfolio with 18% return and what is the risk of this portfolio?

c. How do you get a portfolio with 100% return and what is the risk of this portfolio?

d. Suppose the two stocks have realized returns of 30% and-10% next year. What is the realized return of the equal-weighted portfolio, and what will be the value of your wealth if you started with $100?

Reference no: EM132195924

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