A Portfolio Is Composed of Two Shares, a and B

question 32

Multiple Choice

A portfolio is composed of two shares, A and B. Share A has a standard deviation of return of 24% while Share B has a standard deviation of return of 18%. Share A comprises 60% of the portfolio while Share B comprises 40% of the portfolio. If the variance of return on the portfolio is .0380, the correlation coefficient between the returns on A and B is ________.

• A)0.583
• B)0.225
• C)0.327
• D)0.128

---

Definitions:

Parking Permit

A document or card that authorizes a vehicle to be parked in a designated area or parking lot for a period.

Ratio

A quantitative relationship between two numbers showing how many times the first number contains the second.

Proportion

A part, share, or number considered in comparative relation to a whole.

Overhead

The ongoing business expenses not directly attributed to creating a product or service, such as rent, utilities, and administrative costs.