A margin user has a situation where the riskfree rate is 3% and the risky portfolio has an expected return of 15% with a standard deviation of 8%. If the proportion in the riskfree asset is -.9, the standard deviation of the portfolio would be

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Quizplus · Accepted Answer

The standard deviation of the portfolio is calculated by multiplying the standard deviation of the risky portfolio by the proportion invested in it. Here, the proportion in the risky asset is 1.9 (since the proportion in the risk-free asset is -0.9), so the standard deviation is 1.9 * 8% = 15.2%.

A Margin User Has a Situation Where the Riskfree Rate