Weight 0.9 0.1 The data on the left represents a financial portfolio
Return 12.0% 3.0%
SD 6.0% 1.0% # Question Answer
13 What is the expected return of the portfolio?
14 What is the variance of the portfolio?
Now suppose stocks are correlated with bonds (r = -.34)
15 What is the expected return of the portfolio?
16 What is the covariance of the returns?
17 What is the variance of the portfolio returns?
Sample Solution