Examples 28An investor has € 1000. Hearing from an investment opportunity with an expected rate of return of 24%, she sells short another security with an expected return of 5% for € 4000 and invests all his money in the other security. What is the expected rate of return on the portfolio?
Given are two uncorrelated securities: Stock A with E(r)=12%, SD(r)=8% and stock B with E(r)=2%, SD(r)=10%. Calculate the expected rate of return and standard deviation for a portfolio of € 15000 long in A and €5000 short in B.
Single-period random cash flows: Mean-variance portfolio theory