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Ulleksa [173]
4 years ago
9

A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard

deviation of return of 15%. The correlation coefficient between the returns of A and B is 0.45. Stock A comprises 40% of the portfolio, while stock B comprises 60% of the portfolio. The standard deviation of the return for this portfolio is _____________.
Business
1 answer:
Licemer1 [7]4 years ago
5 0

Answer: the options are listed below.

A. 18.45%

B. 17.67%

C. 23%

D. 19.76%

The correct option is D. 19.76%.

Explanation:

σ2p = (0.402)(0.352) + (0.602)(0.15)2 + (2)(0.4)(0.6)(0.35)(0.15)(0.45)

σ2p = 0.039046

σp = 19.76%

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