Your portfolio has 25% of its value invested in Bombardier and the remainder invested in Lululemon.Bombardier stock has a volatility of 30%,while Lululemon stock has a volatility of 18%.If the correlation between Bombardier and Lululemon is 0.2,what is the standard deviation of your portfolio?

Question

Quizplus · Accepted Answer

The standard deviation of a portfolio is calculated using the formula: √(w1²σ1² + w2²σ2² + 2w1w2σ1σ2ρ), where w1 and w2 are the weights, σ1 and σ2 are the volatilities, and ρ is the correlation. Plugging in the values: √(0.25²*0.3² + 0.75²*0.18² + 2*0.25*0.75*0.3*0.18*0.2) = 16.7%.

Your Portfolio Has 25% of Its Value Invested in Bombardier