A Portfolio Consisting of Four Stocks Is Expected to Produce

question 83

Multiple Choice

A portfolio consisting of four stocks is expected to produce returns of 9%, -11%, 13% and 17%, respectively, over the next four years. What is the standard deviation of these expected returns?

• A) 10.05%
• B) 11.60%
• C) 12.44%
• D) 33.42%

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Definitions:

Compounded Monthly

An interest calculation method where interest earned is added to the principal each month, affecting subsequent interest calculations.

Effective Rate

The actual annual interest rate that accounts for compounding over a given period, providing a true reflection of the financial cost or benefit.

Nominal Rate

The stated interest rate of a financial instrument, without adjustment for inflation or compounding frequencies.

Compounded Monthly

The method of computing interest that includes both the original amount and the interest accrued over past months, applied each month.