Stock A has an expected return of 14% and a standard deviation of 35%. Stock B has an expected return of 20% and a standard deviation of 55%. The correlation coefficient between Stocks A and B is 0.2. What is the expected return of a portfolio invested 25% in Stock A and 75% in Stock B

The expected return from a portfolio consisting of 25% of stock A and 75% of stock B is 18.5%

Explanation:

Return on portfolio=Return of security A * Weight of security A+Return of security B * Weight of security B

Return of security A=14%

Return of security B=20%

Weight of security A=25%

Weight of security B=75%

Return on portfolio = 14 % ∗ 25 / 100 + 20% ∗ 75 / 100

Return on portfolio = 18.5 %