Stock a Has a Standard Deviation of 25% Per Year

question 8

Multiple Choice

Stock A has a standard deviation of 25% per year and Stock B has a standard deviation of 20% per year. The correlation between Stock A and Stock B is .30. You have a portfolio of these two stocks wherein Stock B has a portfolio weight of 40%. What is your portfolio variance?

• A).03022
• B).03156
• C).03239
• D).03610
• E).03304

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Definitions:

Merger

A strategic corporate action where two or more entities combine their operations to form a new organization or become part of an existing one.

Tender Offer Takeovers

An acquisition strategy where the bidder offers to purchase shares from shareholders directly at a specified price, typically at a premium over the market price.

Gains

The financial increase obtained from an investment or transaction, exceeding the initial cost or investment.

Mergers

The combination of two or more companies into a single entity, often aiming to achieve greater efficiency or market share.