Question

You invest 20% of your money in the treasury bill that pays 5% and 80% of your money in a risky portfolio with an expected return of 12% and a volatility of 23%. What is the expected return and volatility of your investment, respectively?

Answer 1

Answer:

10.60% and 18.40%

Explanation:

Expected Return on Investment = 0.20(0.05) + 0.80(0.12)

Expected Return on Investment = 0.01 + 0.096

Expected Return on Investment = 0.106

Expected Return on Investment = 10.60%

Standard Deviation of Investment = 0.80*0.23

Standard Deviation of Investment =  0.184

Standard Deviation of Investment = 18.40%

Thus, the expected return and volatility of the investment is 10.60% and 18.40% respectively.