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Denard has two investment opportunities. He can invest in The Sunglasses Company or The Umbrella ...

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Denard has two investment opportunities. He can invest in The Sunglasses Company or The Umbrella ...

Denard has two investment opportunities. He can invest in The Sunglasses Company or The Umbrella Company. If he diversifies his investment by putting 50% of his money into each company, what is the expected return and standard deviation of his portfolio?

State of the Economy   Probability of the State   Expected Return Sunglasses Company   Expected Return
Umbrella Company
Sunny   .50   25%   0%
Rainy   .50   0%   25%

A) The expected return for the portfolio is 25.00% and the standard deviation 25.00%.
B) The expected return for the portfolio is 12.50% and the standard deviation 0.00%.
C) The expected return for the portfolio is 25.00% and the standard deviation 0.00%.
D) The expected return for the portfolio is 12.50% and the standard deviation 12.50%.

Textbook

Financial Management: Core Concepts

Edition: 2^nd

Author: Brooks

Read 349 times

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