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quester [9]
2 years ago
15

A portfolio is composed of two securities, Stock X and Stock Z. Stock X has a standard deviation of returns of 35%, while Stock

Z has a standard deviation of returns of 15%. The correlation coefficient between the returns on X and Z is .25. If Stock X comprises 40% of the portfolio, while Stock Z comprises 60% of the portfolio, what is the standard deviation of this two-risky-asset portfolio
Business
1 answer:
emmainna [20.7K]2 years ago
8 0

Answer:

Portfolio SD = 0.18439 or 18.439%

Explanation:

The standard deviation of a stock or a portfolio is the measure of the total risk contained in the stock or portfolio. Risk can be defined as the volatility of the stock returns. To calculate the standard deviation of a two stock portfolio, we use the attached formula.

If the weight of stock x is 40%, the weight of stock y will be 1 - 40% = 60%

SD = √(0.4)^2 * (0.35)^2 + (0.6)^2 * (0.15)^2 + 2 * 0.4 * 0.6 * 0.25 * 0.35 * 0.15

SD = 0.18439 or 18.439%

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The break even point is how many units you have to sell to pay the fixed costs. The selling price per unit is 124 and the cost per unit is 94. The contribution margin is 124-94 = 30. This means that per every unit you sell, you have $30 for paying the fixed costs. So, the total units for paying all the fixed costs are 72,760/30 = 2,425.33.

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Answer: OPTION D

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A. Consuming more capital today will result in more depletion of natural resources that are limited in amount thus there would be no sustainable development.

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