A Stock Fund Has a Standard Deviation of 18% and a Bond

question 70

Multiple Choice

A stock fund has a standard deviation of 18% and a bond fund has a standard deviation of 10%. The correlation of the two funds is .15. What is the approximate weight of the stock fund in the minimum variance portfolio?

• A)11%
• B)15%
• C)20%
• D)24%
• E)27%

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Definitions:

Inventory

Goods and materials that a business holds for the ultimate goal of resale, production, or utilization in rendering services.

Asset

An economic resource controlled by an entity that is expected to produce future benefits.

Revenues

The total amounts of money generated by a company from its normal business operations, before any expenses are subtracted.

Net Profit Margin Ratio

A financial performance metric that measures the percentage of net income derived from total revenue, showing how much of each dollar earned by the company is translated into profits.