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Compute what are the expected return and standard deviation

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Reference no: EM132718230

The expected return on Big Time Toys is 12% and its standard deviation is 20.6%. The expected return on Chemical Industries is 11% and its standard deviation is 25.9%.

Problem a. Suppose the correlation coefficient for the two stocks' returns is 0.23. What are the expected return and standard deviation of a portfolio with 38% invested in Big Time Toys and the rest in Chemical Industries? (Round your answers to 2 decimal places.)

Problem b. If the correlation coefficient is 0.73, recalculate the portfolio expected return and standard deviation, assuming the portfolio weights are unchanged. (Round your answers to 2 decimal places.)

Problem c. Why is there a slight difference between the results, when the correlation coefficient was 0.23 and when it was 0.73?

Reference no: EM132718230

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