I аm building а pоrtfоliо composed of SP500 аnd Bonds. Assume that SP500∼ N(11, 192) and Bonds∼ N(4, 62). Here we measure the annual return in percentage (i.e., the Bond has an expected annual return of 4%, with a standard deviation of 6%). Consider a 50-50 split between SP500 and Bonds, and assume the standard deviation of this 50-50 portfolio is sd(0.5SP500 + 0.5Bonds) = 11.000. What is sd(0.8SP500 + 0.2Bonds)? (Hint: First try to compute cov(SP500,Bonds).)
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