The total risk of Portfolios A,B and C are 49%2, 64%2 and 100%2 respectively. The market price of risk is 8%. The Market Portfolio has an expected return and a total risk of 11% and 100%2 respectively.
I want to form another Portfolio H by investing $7,000 in Portfolio A ancl $3,000 in Portfolio B.
I have the following questions which require your valuable advices. What is the standard deviation of portfolio H if the correlation coefficient between Pottfolio A and Portfolio B is:
1.perfectly positively correlated
2.uncorrelated
3.perfectly negatively correlated
State the final answer with 2 decimal places in percentage What conclusions on risk reduction you can draw for each case from the above computations and answers?