An Investment fiRm Is Considering a Portfolio with Equal Weighting

question 262

Multiple Choice

An investment firm is considering a portfolio with equal weighting in a cyclical stock and a countercyclical stock. It is expected that there will be three economic states; Good, Average and
Bad, each with equal probabilities of occurrence. The cyclical stock is expected to have returns of
12%, 5% and 1% in Good, Average and Bad economies respectively. The countercyclical stock is
Expected to have returns of -8%, 2% and 14% in Good, Average and Bad economies respectively.
Given this information, calculate portfolio standard deviation.

• A) 7.33%
• B) 6.33%
• C) 5.33%
• D) 4.33%
• E) 3.33%

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Definitions:

Rows

In the context of data, rows represent individual records or observations in a database or table.

Average Age

The mean age of a group of individuals, calculated by adding their ages together and dividing by the total number of individuals.

Voluntary Response Sampling

A sampling method in which participants self-select to be part of a survey or study, often leading to biased results due to non-random participation.

College Newspaper

A publication produced by students of a college or university, covering campus news and events, and often including opinion pieces, features, and entertainment.