A Stock Fund Has a Standard Deviation of 18 Percent

question 35

Multiple Choice

A stock fund has a standard deviation of 18 percent and a bond fund has a standard deviation of 11 percent. The correlation of the two funds is .24. What is the approximate weight of the stock fund in the minimum variance portfolio?

• A) 16 percent
• B) 19 percent
• C) 21 percent
• D) 24 percent
• E) 27 percent

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Definitions:

Forces

Agencies or influences that cause movement or change, often used in the context of natural phenomena or military strength.

Harm

Damage or injury inflicted on someone or something, often resulting in loss or detriment.

Res Ipsa Loquitur

A legal doctrine stating that negligence of the defendant can be inferred from the nature of the accident, without direct evidence.

Court

A governmental institution authorized to resolve legal disputes and administer justice.