Consider the Data Provided in the Table Below for a Portfolio

question 47

Multiple Choice

Consider the data provided in the table below for a portfolio of Assets A and B. The correlation of the two assets is ? = -0.9523. What is the standard deviation of the returns of the portfolio? $\begin{array}{|l|c|c|} \hline& \text { Asset A } & \text { Asset B } \\\hline \text { Portfolio } & \\\text { Weights } &0.33 & 0.67 \\\hline\text {Standard}\\ \text {Deviation}& 0.5 & 0.6\\\hline\end{array}$

• A)6.25%
• B)25%
• C)35%
• D)55%
• E)57.5%

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Definitions:

American Call Option

A type of options contract that gives the holder the right, but not the obligation, to buy an asset at a set price at any time before the expiration.

Exercise Price

The cost at which the possessor of an option is allowed to purchase (in the case of a call option) or dispose of (in the case of a put option) the asset underneath.

Netscape Stock

Refers to the equity of Netscape Communications Corporation, a pivotal company in the early internet era known for its web browser.

Cross-Hedging

A risk management strategy that involves hedging a position in one asset by taking a position in another asset with similar price movements.