You Have a Portfolio Which Is Comprised of 40% of Stock

question 72

Multiple Choice

You have a portfolio which is comprised of 40% of Stock A and 60% of Stock B. What is the portfolio standard deviation?
$\begin{array}{lllr}\text { State of the Economy } & \text { Probability } &\text {E(R) }_{A}&\text { E(R) }_{B}\\&&40\%&60\%\\\\\text { Boom }&.10&20\%&14\%\\\text { Normal } & .75 & 11\% & 9 \% \\\text { Recegsion } & .15& -20 \% & -5 \%\end{array}$

• A)4.00%
• B)5.56%
• C)6.06%
• D)6.82%
• E)7.95%

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Definitions:

Slope

In mathematics, the rate at which a line rises or falls relative to a horizontal distance.

Indifference Curves

Graphs showing different bundles of goods between which a consumer is indifferent, reflecting the consumer's preferences and trade-offs.

Bundle

A combination of goods or services that are sold together as a single package.

Constants

Values that do not change in mathematical equations or scientific experiments, serving as fixed references.