You have decided to create a portfolio with two assets: stock X and stock Y.You invest 20% of your funds in X and 80% of your funds in stock Y.The standard deviation of X is 30% and the standard deviation of Y is 40%.The two stocks have a correlation coefficient of - 0.5.What is the portfolio's standard deviation?
A) 30.00%
B) 29.46%
C) 33.24%
D) 36.92%
E) 40.00%

Question

Quizplus · Accepted Answer

Apply the equation for the standard deviation of a 2 asset portfolio: σ_p = 11ea7fdb_fc05_b88a_a768_7f3a641e3160_TB2902_11 σ_p = 11ea7fdb_fc05_b88b_a768_2fbef007f702_TB2902_11 σ_p = 11ea7fdb_fc05_b88c_a768_01a22db5eceb_TB2902_11 σ_p = 11ea7fdb_fc05_b88d_a768_7965d5753bf9_TB2902_11 = 0.2946 or 29.46%

You Have Decided to Create a Portfolio with Two Assets