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Calculate the expected return

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Reference no: EM133052518

Question - A portfolio consists of two stocks:

Stock

Expected Return

Variance

Beta

Weight

Dee Co.

8%

1.96%

1.4x

0.45

Zed Ltd.

10%

4.0%

0.8x

0.55

The correlation between the two stock's returns is -0.20.

Required -

a. Calculate the expected return, standard deviation and Beta of the portfolio

b. Given that the risk free rate is 3% and the expected market rate is 7%, would you invest in this portfolio? Why?

Reference no: EM133052518

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