The expected returns for ABC Company and XYZ Company are 12 percent and 9 percent,respectively.The standard deviation is 20 percent for ABC and 15 percent for XYZ.What is the portfolio standard deviation if one-third of the portfolio is in ABC and the two securities have perfect positive correlation?
A) 16.67%
B) 10.00%
C) 2.78%
D) 1.00%

Question

Quizplus · Accepted Answer

σ = √[(w_aABC)(σ_ABC)+(w_XYZ)(σ_XYZ)]² = √(0.3333*0.20+0.6667*0.15)²= 16.67%

The Expected Returns for ABC Company and XYZ Company Are