Your portfolio is invested 28 percent each in A and C, and 44 percent in B. What

Question

Your portfolio is invested 28 percent each in A and C, and 44 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculaitons. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

THIS IS NOT THE RIGHT ANSWER:

(a)

The expected return of the portfolio is

So expected return of the portfolio is 11.29%.

-------------------------

b-1

Portfolio variance is

------------------------------

b-2

Standard devaition of the portfolio is

So

standard deviation is 14.44%.

please tell me where i went wrong

Explanation / Answer

you have made a calculation error in expected return :

The return in case of poor = ( -.04 *.28 ) +(-.07 *.44) +(-.05 * .28)

                                      = - .0112 - .0308 - .014

                                      = - .056

so expected return = (.20 * .336 ) +(.50 * .1356 ) +(.25 * - .056)+(.05*-.1336)

                            = .0672 + .0678 - .014 - .00668

                           = .11432 or 11.43%

2)portfolio variance= .20 (.336 - .1143)^2 + .50(.1356 -.1143)^2 + .25(-.056 - .1143)^2 + .05(-.1336 - .1143)^2

                           = .20 * .0492 +    .50* .0005   + .25* .0290 + .05* .06145

                          = .00984 + .00025 + .00725 + .003073

                          = .02041

3)SD =square root of .02041

       = .1429 or 14.29 %

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