The Standard Deviation of a Portfolio of Risky Securities Is

question 27

Multiple Choice

The standard deviation of a portfolio of risky securities is

• A) the square root of the weighted sum of the securities' variances.
• B) the square root of the sum of the securities' variances.
• C) the square root of the weighted sum of the securities' variances and covariances.
• D) the square root of the sum of the securities' covariances.

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Definitions:

Straight-Line Method

A depreciation method that allocates an equal portion of the initial cost of an asset to each period of its useful life.

Premium on Bonds Payable

The amount by which a bond's selling price exceeds its face value or par value, often resulting from interest rates lower than the bond's coupon rate.

Bonds Payable

Long-term liabilities representing money owed by an entity to bondholders, to be repaid at a specific future date.

Premium on Bonds Payable

The excess of a bond's sale price over its principal amount.