Consider an Equally Weighted Portfolio That Contains Five Stocks

question 100

Multiple Choice

Consider an equally weighted portfolio that contains five stocks.If the average volatility of these stocks is 40% and the average correlation between the stocks is .5,then the volatility of this equally weighted portfolio is closest to:

• A).17.
• B).03.
• C).41.
• D).19.

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Definitions:

Net Income

The total profit or loss of a company after all expenses, taxes, and costs have been subtracted from total revenues.

Subsidiary

A company that is controlled by another company, typically through majority share ownership.

Fair Value

The value obtained for offloading an asset or incurred in passing on a liability in a smooth transaction among those active in the market on the evaluation date.

Bonds Payable

Long-term debt securities issued by a company, promising to pay a specified sum of money at a future date.