Refer #27-#28 to the following information: ------------------------------------

Question

Refer #27-#28 to the following information:

-----------------------------------------------------------------------------------

Probability A B C

-----------------------------------------------------------------------------------

0.4 10% 18% 8%

0.6 22% 14% 30%

-----------------------------------------------------------------------------------

We will invest 30% of your initial investment in Stock A, 30% in Stock B and 40% in Stock C.

The standard deviation for the portfolio is: a. 0.058788. b. 0.019596. c. 0.107778. d. 0.054869.

Explanation / Answer

Standard deviation =squareroot of variance

              = SR[30.1056]

               = 5.4869 % or .054869

correct option is "D"

Expected return of portfolio = [11.6*.40]+[22.8*.60]

      = 4.64+ 13.68

     = 18.32

Probability Return of portfolio Variance =[Return-18.32]^2*Probability .4 [10*.30]+[18*.30]+[8*.40]=11.6 [11.6-18.32]^2*.40= 18.0634 .6 [22*.30]+[14*.30]+[30*.40]=22.8 [22.8-18.32]^2*.60= 12.0422 Total variance 30.1056

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.