USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.15. What is the expected return of a portfolio of two risky assets if the expected return E(R_i), standard deviation ( $\sigma$i), covariance (COV_i,j), and asset weight (W_i) are as shown above? A) 13.8% B) 14.6% C) 15.0% D) 15.2% E) 16.8%

Question

Quizplus · Accepted Answer

The expected return of a portfolio of two risky assets is given by:E(Rp) = W1 * E(R1) + W2 * E(R2) + COV(R1,R2) * W1 * W2 / $\sigma$1 * $\sigma$2= 0.6 * 12% + 0.4 * 16% + 0.05 * 0.6 * 0.4 * 10% / 15% * 20%= 0.072 + 0.064 + 0.0008= 0.1368 or 13.68%

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) σ\sigmaσ I), Covariance (COVi,j), and Asset Weight (Wi) Are as Shown

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
$\sigma$ I), Covariance (COV_i,j), and Asset Weight (W_i) Are as Shown