For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation).

Full question attached

A. 8.6%

B. 14.09%

Explanation:

A) given that portfolio weights =50% each

Expected return= w*r+w*r where w is portfolio weight and r is return on each asset:

=0.50*0.078+0.50*0.094= 0.086

=8.6%

B) The volatility (standard deviation)

=√w²*std²+w²*std²+2*w*w*std*std*corr

=√0.50²*0.157²+0.50²*0.203²+2*0.50*0.50*0.157*0.203*0.213

=0.1409

=14.09%

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