Given the following information,what is the standard deviation of the returns on a portfolio that is invested 40 percent in Stock A,35 percent in Stock B,and the remainder in Stock C?
A)11.86 percent
B)12.72 percent
C)13.16 percent
D)13.43 percent
E)13.57 percent

Question

Given the following information,what is the standard deviation of the returns on a portfolio that is invested 40 percent in Stock A,35 percent in Stock B,and the remainder in Stock C? 
A)11.86 percent 
B)12.72 percent 
C)13.16 percent 
D)13.43 percent 
E)13.57 percent

Quizplus · Accepted Answer

E(R_Normal) = (0.40 × 0.143) + (0.35 × 0.167) + (0.25 × 0.182) = 0.16115E(R_Recession) = (0.40 × -0.098) + (0.35 × 0.054 + (0.25 × -0.269) = -0.08755E(R_Portfolio) = (0.65 × 0.16115) + (0.35 × -0.08755) = 0.074105Variance = 0.65(0.16115 - 0.074105)² + 0.35(-0.08755 - 0.074105)² = 0.014071Standard deviation = Ö0.014071 = 11.86 percent

Given the Following Information,what Is the Standard Deviation of the Returns