A Portfolio Has 50% of Its Funds Invested in Security

question 13

Multiple Choice

A portfolio has 50% of its funds invested in Security One and 50% of its funds invested in Security Two.Security One has a standard deviation of 6%.Security Two has a standard deviation of 12%.
The securities have a coefficient of correlation of 0.5.Which of the following values is the portfolio
Variance?

• A).0027
• B).0063
• C).0095
• D).0104
• E)One must have covariance to calculate expected value.

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Definitions:

Present Value Factors

These are factors used in financial formulas to determine the present value of future cash flows or income.

Market Rate

The prevailing interest rate available in the financial markets for a similar instrument or the going rate for goods or services in a certain market.

Issuance Price

Refers to the price at which a company's securities, such as stocks or bonds, are sold to investors when they are first made available.

Straight-line Method

A method of calculating depreciation of an asset by evenly spreading its cost over the expected useful life.