Determine the expected return and variance of return


Consider two risky securities X and Y displaying the following information:

Security                                              X       Y

Expected return                               0.10   0.15

Standard deviation                          0.18   0.25

Correlation Coefficient between

Securities X and Y                               0.7

The risk free rate is 4%. Determine the expected return and variance of return for a portfolio that is composed of 30 percent of security X, 50 percent of security Y, and 20 percent of risk-free assets.

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Finance Basics: Determine the expected return and variance of return
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