Determine the expected return and standard deviation

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Reference no: EM132012919

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%

Reference no: EM132012919

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