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You are considering two assets with the following characteristics ER1 015 Er1 010 w1 50 ER2 020 Er2 020 w2 50 Where E R is expected return and

You are considering two assets with the following characteristics:

E(R1) = 0.15     E(r1) = 0.10   w1 = .50

E(R2) = 0.20    E(r2) = 0.20   w2= .50

 

Where E( R) is expected return and E(r) is expected standard Deviation. W is asset weight.

 

Calculate the mean and standard deviation of the portfolio if the correlation r1,2 = 0.40, and -0.60 respectively.

 

 

Plot the two portfolios on a risk-return graph and explain the differences.

 

 

 

 

 

 

 

 

 

 

Apr 10 2020 View more View Less

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