You Put Half of Your Money in a Stock Portfolio

question 36

Multiple Choice

You put half of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 24%. You put the rest of your money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 12%. The stock and bond portfolios have a correlation of .55. The standard deviation of the resulting portfolio will be ________.

• A) more than 18% but less than 24%
• B) equal to 18%
• C) more than 12% but less than 18%
• D) equal to 12%

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Definitions:

Speed

The rate at which an object covers distance, typically measured in units of distance over time.

Car

A wheeled vehicle used for transporting passengers, which also carries its own engine or motor.

Estimate

An approximate calculation or judgement of the value, number, quantity, or extent of something.

Income

The financial gain received by an individual or a business, typically calculated on a yearly basis, from work, investments, or other sources.