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

-The volatility of a portfolio that is equally invested in Wal-Mart and Duke Energy is closest to:

Question

Use the table for the question(s)below.
Consider the following expected returns,volatilities,and correlations:
 
-The volatility of a portfolio that is equally invested in Wal-Mart and Duke Energy is closest to:

Quizplus · Accepted Answer

The volatility of a portfolio that is equally invested in Wal-Mart and Duke Energy can be calculated using the formula:
Portfolio Volatility = √[w1^2 x σ1^2 + w2^2 x σ2^2 + 2w1w2ρ12σ1σ2]
where w1 and w2 are weights of Wal-Mart and Duke Energy, respectively, σ1 and σ2 are their volatilities, and ρ12 is their correlation.
Substituting the given values, we get:
Portfolio Volatility = √[(0.5)^2 x (0.15)^2 + (0.5)^2 x (0.10)^2 + 2 x 0.5 x 0.5 x 0.2 x 0.15 x 0.10] = 0.076 or 7.6%
Therefore, the closest option is C) 7.6%.

Use the Table for the Question(s)below