A Portfolio Has 25% of Its Funds Invested in Security

question 124

Multiple Choice

A portfolio has 25% of its funds invested in Security C and 75% of its funds invested in Security D. Security C has an expected return of 8% and a standard deviation of 6%. Security D has an expected return of 10% and a standard deviation of 10%. The securities have a coefficient of correlation of 0.6. Which of the following values is closest to portfolio return and variance?

• A) .090; .0081
• B) .095; .001675
• C) .095; .0072
• D) .100; .00849
• E) Cannot calculate without the number of covariance terms.

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Definitions:

Primary Emotions

Fundamental feelings that are universally experienced by humans, such as happiness, sadness, fear, and anger, that are not derived from other emotions.

Physiological Differences

Variations in the physical and biological functions between individuals or groups.

Schachter Two-factor Theory

A theory suggesting that emotion arises from physiological arousal and cognitive labeling of the cause of that arousal.

Dangerous Situation

A scenario or environment that poses a risk of harm or injury to a person or people.