The expected rates of returns on stocks A and B are, respectively, 8.75% and 12.00% next period. The corresponding variances of the returns are 0.015469 and 0.03960, while the correlation in the returns is estimated to be minus 0.2121.
Assuming the capital is invested 50% in stock A and 50% in stock B; what is the portfolio's expected rate of return next period? State your answer as a decimal number rounded to two digits.
How do I calculate the return?
I thought I do.
8.75% * 50 % + 12% * 50% = 10.38
But I get wrong answer out of that?
Assuming the capital is invested 50% in stock A and 50% in stock B; what is the portfolio's expected rate of return next period? State your answer as a decimal number rounded to two digits.
How do I calculate the return?
I thought I do.
8.75% * 50 % + 12% * 50% = 10.38
But I get wrong answer out of that?
