Consider an Equally Weighted Portfolio That Contains 20 Stocks

question 99

Multiple Choice

Consider an equally weighted portfolio that contains 20 stocks.If the average volatility of these stocks is 35% and the average correlation between the stocks is .4,then the volatility of this equally weighted portfolio is closest to:

• A).17.
• B).41.
• C).14.
• D).37.

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Definitions:

Relative Size

An aspect of visual perception that allows one to judge the size of an object in relation to other objects within the same field of view.

Linear Perspective

A system of creating an illusion of depth on a flat surface by converging lines in a painting or drawing to a single vanishing point on the composition's horizon line.

Interposition

A visual cue in which one object partly obstructs another, indicating that the obstructing object is closer in distance.

Convergence

The process by which two or more things come together or evolve toward becoming similar or identical, often used in the context of ideas, technologies, or evolutionary biology.