You put half of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 24%. You put the rest of your money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 12%. The stock and bond portfolios have a correlation of .55. The standard deviation of the resulting portfolio will be .

16.09 %

Explanation:

stock portfolio expected return = 14%

stock portfolio standard deviation = 24% ( Sₐ )

Risky bond portfolio expected return = 6%

Risky bond portfolio standard deviation = 12% ( S₂ )

correlation between investments = 0.55 ( r )

To calculate the standard deviation of the resulting portfolio we will have the find the resulting Variance of the new portfolio

Resulting variance = ( Wₐ² * Sₐ²) +( Wₐ² * S₂²) +( 2 * Wₐ * Sₐ * Wₐ * S₂* r)

Wₐ = the weight of the of portfolio since equal amounts are invested hence it will be 50% for each = 0.5

Resulting variance = ( 0.5² * 0.24²) + ( 0.5² * 0.12²) + 2 ( 0.5 * 0.24 *0.5 * 0.12 * 0.55 )

= 0.2592

hence the resulting standard deviation =  = 0.16099 = 16.09%

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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