What Is the Standard Deviation of an Equally Weighted Portfolio

question 45

Multiple Choice

What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0.009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%?

• A) 2.0%
• B) 2.1%
• C) 7.8%
• D) 14.2%
• E) 14.7%

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Definitions:

Mean

The average of a set of numbers, calculated by adding all the numbers together and dividing by the count of numbers.

Annual Revenue

The total income generated by a company or organization in one fiscal year before any deductions are made.

Standard Deviation

A metric that reflects the degree of spread or scattering of values within a collection, illustrating the deviation of values from the central mean.

Probability

An assessment of the probability that a specific event will happen.