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Solve the portfolio return and standard deviation

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Reference no: EM132826981

An investor holds a portfolio which is expected to yield a rate of return of 18% with a standard deviation of 2.5%. The investor is considering buying a new share (investment being 5% of the total investment in the new portfolio).

The share has the following distribution of return:

RETURN            PROBABILITIES
40%               0.30
30%                   0.40
-10%                 0.30

Problem 1: The correction coefficient between the new portfolio and the new security is 0.3; calculate the portfolio return and standard deviation of the portfolio.

Reference no: EM132826981

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