Use the table for the question(s) below.
Consider the following expected returns, volatilities, and correlations:

-The volatility of a portfolio that is consists of a long position of $10000 in Wal-Mart and a short position of $2000 in Microsoft is closest to:
A) 9%
B) 14%
C) 11%
D) 12%

Question

Use the table for the question(s) below.
Consider the following expected returns, volatilities, and correlations:
 
-The volatility of a portfolio that is consists of a long position of $10000 in Wal-Mart and a short position of $2000 in Microsoft is closest to:
A) 9% 
B) 14% 
C) 11% 
D) 12%

Quizplus · Accepted Answer

B) Var(R_p) = x₁²^Var(R₁) + x₂²^Var(R₂) + 2X₁X₂Corr(R₁,R₂)SD₁SD₂ _{= 1.25}²(.14)² + (- 25)²(.24)² + 2(1.25)(-.25)(0.7)(.14)(.24) = .019525 stdev = 11ea7e60_15ae_aa93_ba34_dbd7ac83783b_TB1624_11 = .139732

Use the Table for the Question(s) Below