A Portfolio Is Composed of Two Stocks, a and B

question 13

Multiple Choice

A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is .45. Stock A comprises 40% of the portfolio, while stock B comprises 60% of the portfolio. The standard deviation of the return on this portfolio is ________.

• A) 23%
• B) 19.76%
• C) 18.45%
• D) 17.67%

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Definitions:

Heart Disease

A broad term that covers all types of heart conditions that affect the heart's structure and function.

Cancer

A broad group of diseases characterized by the uncontrolled division of abnormal cells in a part of the body, often leading to tumors.

Death Rates

The number of deaths in a given area or population during a specific period of time, typically expressed per thousand people per year.

Mortality Rate

The quantification of mortality within a specific group of people, adjusted for the group's size, over a given time frame.