Stock J Has a Standard Deviation of 67 Percent, and Stock

question 89

Multiple Choice

Stock J has a standard deviation of 67 percent, and Stock K has a standard deviation of 51 percent. The correlation between the two stocks is -0.10. What is the variance of a portfolio of the two assets with 35 percent invested in Stock J?

• A) 0.1026
• B) 0.2318
• C) 0.1653
• D) 0.1493
• E) 0.1986

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Definitions:

Theoretical Result

An outcome derived from abstract principles and reasoning, often without practical application or empirical testing.

Classical

Classical refers to the established theories and principles that have withstood the test of time, often foundational in fields like physics, music, and literature.

Probability

The likelihood that a particular event will happen, often expressed as a fraction or percentage reflecting the ratio of the occurrences of an event to the total number of possible outcomes.

Meeting

A gathering of two or more people that is conducted for the purpose of achieving a common goal through verbal interaction, such as sharing information or reaching agreement.