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Suppose You Plan to Create a Portfolio with Two Securities

question 72

Essay

Suppose you plan to create a portfolio with two securities: Tobin and Bino, with weights to be greater than or equal to zero.The expected return of Tobin is 10 percent with a standard deviation of 12 percent.The expected return of Bino is 16 percent with a standard deviation of 20 percent.The correlation between the two securities is 0.30.
a)What percentage of your investment should be invested in Tobin to obtain a portfolio standard deviation of 12.2638 percent?
b)What is the expected return of the portfolio?


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