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.