Suppose You Own a Two-Security Portfolio

question 21

Multiple Choice

Suppose you own a two-security portfolio.You have 25.0% of your funds invested in Security A and the balance of your funds invested in Security B.Security A has a standard deviation of 8.0% and Security B has a standard deviation of 12.0%.What is the covariance of the returns on Securities A and B if the portfolio standard deviation is 10.0%?

• A)0.0040
• B)0.0093
• C)0.0147
• D)0.0258

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Definitions:

Neurons

Nerve cells that are the basic building blocks of the nervous system, responsible for transmitting information throughout the body.

Human Brain

The central organ of the human nervous system, responsible for thought, memory, emotion, touch, motor skills, vision, breathing, temperature, and every process that regulates our body.

Birth

The emergence of a baby or other young from the body of its mother; the start of life as a physically separate being.

Co-sleeping

The practice where babies and young children sleep close to one or both parents, as opposed to in a separate room.