Problem: An investor plans to invest 75% of her funds in the common stock of Gamma Industries and 25% in Epsilon Company.
The expected return on Gamma is 12% and the expected return on Epsilon is 16%.
The standard deviation of returns for Gamma is 8% and for Epsilon is 12%. The correlation coefficient between the returns for Gamma and Epsilon is +0.8
Determine the expected return on the investors portfolio.
Determine the standard deviation of returns for this investor's portfolio.