Calculate the Risk (Standard Deviation) of the Following Two-Security Portfolio

question 59

Essay

Calculate the risk (standard deviation) of the following two-security portfolio if the correlation coefficient between the two securities is equal to 0.5.
$\begin{array}{lcc} & \underline { \text { Variance } }&\underline { \text { Weight (in the portfolio) }} \\ \text { Security A } & 10 & 0.3 \\\text { Security B } & 20 & 0.7\end{array}$
A) 17.0 percent
B) 5.4 percent
C) 2.0 percent
D) 3.7 percent

• A) 17.0 percent
• B) 5.4 percent
• C) 2.0 percent
• D) 3.7 percent

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Definitions:

Weight-Bearing Bone

A bone that supports the weight of the body or parts of the body.

Fibula

A slender bone located on the lateral side of the tibia in the lower leg.

Vertebral Column

The vertebral column, also known as the spine or backbone, is a series of vertebrae extending from the skull to the lower back, providing support for the body and protecting the spinal cord.

Coxal Bone

The hip bone, comprising the ilium, ischium, and pubis, forming part of the pelvis.