Suppose an investor creates a three asset portfolio combined of stock X, stock Y, and the risk-free asset. The investor puts 60% in Stock X, 30% in Stock Y, and 10% in the risk free rate.
Calculate the expected return and standard deviation on the portfolio. Round to 4 decimals.
The expected return on the risk free asset is 3%.
|
Prob. Of State |
Stock X |
Stock Y |
| Boom |
50% |
12% |
8% |
| Normal |
15% |
6% |
-5% |
| Bust |
35% |
-3% |
3% |