You have a portfolio which is comprised of 20 percent of stock A and 80 percent of stock B.What is the portfolio standard deviation?
A)4.00 percent
B)5.56 percent
C)6.07 percent
D)6.82 percent
E) 7.47 percent

Question

You have a portfolio which is comprised of 20 percent of stock A and 80 percent of stock B.What is the portfolio standard deviation? 
A)4.00 percent 
B)5.56 percent 
C)6.07 percent 
D)6.82 percent 
E) 7.47 percent

Quizplus · Accepted Answer

E(R-Boom) = (.20 × 19) + (.80 × 13) = 14.2E(R-Normal) = (.20 × 12) + (.80 × 10) = 10.4E(R-Recession) = (.20 × -22) + (.80 × -3) = -6.8E(R-Portfolio) = (.15 × 14.2) + (.75 × 10.4) + (.10 × -6.8) = 9.25%Var(Portfolio) = .15(14.2 - 9.25)² + .75(10.4 - 9.25)² + (-6.8 - 9.25)² = 30.88Std dev(Portfolio) = √30.88 = 5.56%

You Have a Portfolio Which Is Comprised of 20 Percent