An investor invests 60 of his wealth in a risky asset with a

An investor invests 60% of his wealth in a risky asset with an expected rate of return of 15% and a variance of 4% and 40% in a treasury bill that pays 6%. Her portfolio\'s expected rate of return and standard deviation are __________ and __________ respectively.

Solution

Expected return on portfolio = (0.6)(0.15) + (0.4)(0.06) = 0.114
   Standard deviation = (0.6)(sqr root of 0.04) = 0.12