An investor constructs a portfolio with a 75% allocation to a stock index and a 25% allocation to a risk free asset.The expected returns on the risk-free asset and the stock index are 3% and 10%,respectively.The standard deviation of returns on the stock index is 14%.Calculate the expected standard deviation of the portfolio.
A) 7.5%
B) 9.0%
C) 10.5%
D) 11.5%
E) 13.0%

Question

Quizplus · Accepted Answer

0.75(14%)= 10.5%

An Investor Constructs a Portfolio with a 75% Allocation to a Stock