Suppose You Plan to Create a Portfolio with Three Securities

question 67

Multiple Choice

Suppose you plan to create a portfolio with three securities: Dizzy (D) , Lazy (L) , and Crazy (C) .The expected returns for Dizzy, Lazy and Crazy are 6.0%, 8.0%, and 10.0%, respectively.The standard deviation is 9.0% for Dizzy, 15.0% for Lazy, and 12.0% for Crazy.The correlation coefficients among the returns for the three securities are: CORRDL= 0.6, CORRDC = -0.3, and CORRLC = 0.4.What is the portfolio standard deviation if 30.0% of the portfolio is in Dizzy and 10.0% is in Lazy?

• A)0.34%
• B)0.87%
• C)5.82%
• D)9.33%