A Portfolio Consists of Three Securities: Treachery (T), Sleazy (S)

question 98

Multiple Choice

A portfolio consists of three securities: Treachery (T) , Sleazy (S) , and Felony (F) .The expected returns for Treachery, Sleazy, and Felony are 10.0%, 8.0%, and 16.0%, respectively.The standard deviation is 15.0% for Treachery, 20.0% for Sleazy, and 25.0% for Felony.The covariance of the returns on the three securities is: COVTS = 0.0144, COVTF = 0.0084, and COVSF = 0.03.What is the portfolio standard deviation if 20.0% of the portfolio is in Treachery and 35.0% is in Sleazy?

• A)17.73%
• B)13.91%
• C)3.14%
• D)1.93%

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Definitions:

Labor

The effort involving both bodily and intellectual activities applied in generating goods and services.

AVC

Average Variable Cost, the total variable cost divided by the quantity of output produced.

AFC

Average fixed cost, or the total fixed costs divided by the quantity of output produced, indicating how fixed costs per unit change with production levels.

MC

The additional cost incurred for producing one more unit of a good or service; it's synonymous with marginal cost.