Exhibit 7.3
Use the Information Below for the Following Problem(S)
$$\begin{array} { c c }
A sset (A) & \text { A sset (B) } \
\hline \left( R _ { A } \right) = 9 \% & E \left( R _ { B } \right) = 11 \% \
\left( \sigma _ { A } \right) = 4 \% & \left( \sigma _ { B } \right) = 6 \% \
W _ { A } = 0 .4 & W _ { B } = 0 .6 \
C O V _ { A , B } = 0 .0011
\end{array}$$

-Refer to Exhibit 7.3.What is the standard deviation of this portfolio?
A) 3.68%
B) 4.56%
C) 4.99%
D) 5.16%
E) 6.02%

Question

Exhibit 7.3
Use the Information Below for the Following Problem(S)
 $$\begin{array} { c c } 
 A sset (A) & \text {  A sset (B) } \
\hline \left( R _ { A } \right) = 9 \% & E \left( R _ { B } \right) = 11 \% \
\left( \sigma _ { A } \right) = 4 \% & \left( \sigma _ { B } \right) = 6 \% \
W _ { A } = 0 .4 & W _ { B } = 0 .6 \
C O V _ { A , B } = 0 .0011
\end{array}$$

-Refer to Exhibit 7.3.What is the standard deviation of this portfolio?
A) 3.68%
B) 4.56%
C) 4.99%
D) 5.16%
E) 6.02%

Quizplus · Accepted Answer

The standard deviation of a portfolio is calculated using the formula:  $\sigma_p = \sqrt{(W_A^2 \cdot \sigma_A^2) + (W_B^2 \cdot \sigma_B^2) + (2 \cdot W_A \cdot W_B \cdot COV_{A,B})}$.  Substituting the given values:  $\sigma_p = \sqrt{(0.4^2 \cdot 0.04^2) + (0.6^2 \cdot 0.06^2) + (2 \cdot 0.4 \cdot 0.6 \cdot 0.0011)}$.  Calculating this gives approximately 4.56%.

Exhibit 73 Use the Information Below for the Following Problem(S)

Exhibit 73
Use the Information Below for the Following Problem(S)