Consider the following probability distribution for stocks C and D: If you invest 25% of your money in C and 75% in D, what would be your portfolio's expected rate of return and standard deviation
A)9.891%; 8.70%
B)9.945%; 11.12%
C)8.225%; 8.70%
D)10.275%; 11.12%

Question

Consider the following probability distribution for stocks C and D:  If you invest 25% of your money in C and 75% in D, what would be your portfolio's expected rate of return and standard deviation
A)9.891%; 8.70% 
B)9.945%; 11.12% 
C)8.225%; 8.70% 
D)10.275%; 11.12%

Quizplus · Accepted Answer

E(R_P) = 0.25(4.4%) + 0.75(9.5%) = 8.225%; s_P = [(0.25)²(10.35)² + (0.75)²(12.93)² + 2(0.25)(0.75)(10.35)(12.93)(-0.50)]^1/2 = 8.70%.

Consider the Following Probability Distribution for Stocks C and D