1. Expected return, risk and diversification
Harry Joes has invested a third of his funds in
share 1 and 2/3 of his funds in share 2. His assessment of each investment is as follows:
A) What are the expected return and the standard deviation of return on Harry’s Portfolio?
B) Recalculate the expected return and the standard deviation where the correlation between the returns is 0 and 1.0, respectively
C) Is Harry better or worse off as a result of investing in two securities rather than in one security?
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