Consider the data provided in the table below for a portfolio of Assets A and B.The correlation of the two assets is ρ = -0.9523.What is the standard deviation of the returns of the portfolio?

A) 6.25%
B) 25%
C) 35%
D) 55%
E) 57.5%

Question

Consider the data provided in the table below for a portfolio of Assets A and B.The correlation of the two assets is ρ = -0.9523.What is the standard deviation of the returns of the portfolio?

A) 6.25% 
B) 25% 
C) 35% 
D) 55% 
E) 57.5%

Quizplus · Accepted Answer

From the text we know the equation for the standard deviation of a 2 asset portfolio is: σ_p = 11ea7fdb_fc06_06b4_a768_e38e093a9491_TB2902_11 After substituting the inputs from the problem we have: σ_p = 11ea7fdb_fc06_06b5_a768_912f28310106_TB2902_11 σ_p = 11ea7fdb_fc06_06b6_a768_09ca328f1b1a_TB2902_11 σ_p = 11ea7fdb_fc06_2dc7_a768_bf75876bd2d7_TB2902_11 σ_p = 0.24999 or 25%

Consider the Data Provided in the Table Below for a Portfolio