A portfolio consists of two securities: a risk-free asset and an equity security.The expected return on the risk-free asset is 4.25 percent.The expected return of the equity security is 16 percent with a standard deviation of 22 percent.What is the portfolio standard deviation if the expected return for the portfolio is 12 percent?
A) 6.99%
B) 7.49%
C) 10.55%
D) 14.51%

Question

Quizplus · Accepted Answer

Weight in equity,11ea8229_34c3_8448_bbd8_336a021588ea_TB1726_11,Weight in risk-free asset = 1 - 0.6596 = 0.3404 Portfolio standard deviation, 11ea8229_34c3_8449_bbd8_affd7d03b72f_TB1726_11

A Portfolio Consists of Two Securities: a Risk-Free Asset and an Equity