Exhibit 7.1
Use the Information Below for the Following Problem(S)
$\begin{array}{cc}
\text { Asset }(A) & \text { Asset }(B) \
\hline\left(R_{A}\right)=10 \% & E\left(R_{B}\right)=15 \% \
\left(\sigma_{A}\right)=8 \% & \left(\sigma_{B}\right)=9.5 \% \
W_{A}=0.25 & W_{B}=0.75 \
&\text { CoV }_{A}=0.006
\end{array}$

-Refer to Exhibit 7.1.What is the standard deviation of this portfolio?
A) 8.79%
B) 13.75%
C) 12.5%
D) 7.72%
E) 5.64%

Question

Exhibit 7.1
Use the Information Below for the Following Problem(S)
 $\begin{array}{cc}
\text { Asset }(A) & \text { Asset }(B) \
\hline\left(R_{A}\right)=10 \% & E\left(R_{B}\right)=15 \% \
\left(\sigma_{A}\right)=8 \% & \left(\sigma_{B}\right)=9.5 \% \
W_{A}=0.25 & W_{B}=0.75 \
&\text { CoV }_{A}=0.006
\end{array}$

-Refer to Exhibit 7.1.What is the standard deviation of this portfolio?
A) 8.79%
B) 13.75%
C) 12.5%
D) 7.72%
E) 5.64%

Quizplus · Accepted Answer

The standard deviation of the portfolio is:$$\sigma_p = \sqrt{W_A^2 \sigma_A^2 + W_B^2 \sigma_B^2 + 2W_A W_B \sigma_A \sigma_B 	ext{Cov}_{A,B}}$$$$\sigma_p = \sqrt{0.25^2 (0.08)^2 + 0.75^2 (0.095)^2 + 2(0.25)(0.75)(0.08)(0.095)(0.006)}$$$$\sigma_p = 0.0879 = 8.79%$$

Exhibit 71 Use the Information Below for the Following Problem(S)

Exhibit 71
Use the Information Below for the Following Problem(S)