If the standard deviation of returns on the market is 20 percent, and the beta of a well-diversified portfolio is 1.5. Calculate
the standard deviation of this portfolio.
a. 30 percent.
b. 20 percent.
c. 15 percent.
d. 10 percent.
1 answer:
Answer:
a. 30 percent.
Step-by-step explanation:
Given that:
The standard deviation of returns = 20 percent
Beta = 1.5
Beta=Standard deviation of portfolio × correlation/Standard deviation of market × Correlation
Since Correlation with the market will be +1;
Then;
The Standard deviation of portfolio = 1.5 × 20%
The Standard deviation of portfolio = 30.00%
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