Final answer:
The calculation for the standard deviation of the portfolio with an expected return of 13% cannot be provided without additional information on the weights of the assets. However, it is understood that higher returns typically come with higher risks, and the efficient allocation of assets in a portfolio depends on striking a balance between these two factors.
Step-by-step explanation:
The student is asking about portfolio optimization, which involves selecting the best combination of assets that achieves the highest expected return for a given level of risk. In this case, the portfolio must yield an expected return of 13% and have the lowest possible risk, meaning it should lie on the efficient frontier. To calculate the standard deviation of such a portfolio, one would typically use the formula that considers the weights of the assets in the portfolio, the standard deviations of the individual assets, and the correlation between their returns. However, since we don't have the weights of the assets, we cannot compute the exact standard deviation without additional information.
It's essential to note that higher returns are usually associated with higher risks. Over time, stocks have provided higher returns than bonds, but with greater volatility. Conversely, bonds offer lower returns but with lower volatility compared to stocks. Savings accounts yield the lowest returns but have virtually no volatility. Understanding the trade-off between risk and return is critical for efficient portfolio management and wealth accumulation.