A Two- Asset Portfolio Is Made Up of 80 Per

question 21

Multiple Choice

A two- asset portfolio is made up of 80 per cent of Share A, for which the variance is 50%, and 20 per cent of Share B, with variance 60%. The covariance between the two shares is 25%. What is the standard deviation of the two- asset portfolio?

• A) 87.54%
• B) 65.12%
• C) 73.23%
• D) 91.63%

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Definitions:

Risk-Free Asset

is an investment that is expected to deliver a guaranteed return with no risk of financial loss.

Expected Rate

Anticipated return on an investment, often considering the risk and time value of money.

Standard Deviation

Standard deviation quantifies the amount of variation or dispersion of a set of values, indicating how much the values differ from the mean.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used in statistics to quantify the spread of a data set.