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

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

C) Var(Rp) = w12SD(R1) + w22SD(R2) + 2X1X2Corr(R1,R2)SD1SD2
= 0.52(0.12)2 + 0.52(0.06)2 + 2(0.5)(0.5)(0)(0.12)(0.06)
= 0.0045
stdev = 11eaabab_c086_8531_b90e_b3bb7f809ba5_TB5536_11 = 0.06708204

Consider the Following Expected Returns, Volatilities, and Correlations