Roger has a portfolio comprised of $8,000 of stock A and $12,000 of stock B.What is the standard deviation of this portfolio?

A) 4.67 percent
B) 9.97 percent
C) 7.23 percent
D) 8.83 percent
E) 10.42 percent

Question

Roger has a portfolio comprised of $8,000 of stock A and $12,000 of stock B.What is the standard deviation of this portfolio?

A) 4.67 percent 
B) 9.97 percent 
C) 7.23 percent 
D) 8.83 percent 
E) 10.42 percent

Quizplus · Accepted Answer

Total portfolio value = $8,000 + $12,000 = $20,000 E(R_Norm) = ($8,000/ $20,000) × 11 + ($12,000/ $20,000) × 15 = 13.4 E(R_Rec) = ($8,000/ $20,000) × -6 + ($12,000/ $20,000) × -19 = -13.8 E(R_Port) = (0.84 × 13.4 + (0.16 × -13.8) = 9.048 Var_Port = 0.84(13.4 - 9.048)² + 0.16 (-13.8 - 9.048)² = 99.43 Std Dev_Port = √99.43 = 9.97 percent

Roger Has a Portfolio Comprised of $8,000 of Stock a and $12,000