Consider an Equally Weighted Portfolio That Contains 20 Stocks

question 99

Multiple Choice

Consider an equally weighted portfolio that contains 20 stocks.If the average volatility of these stocks is 35% and the average correlation between the stocks is .4,then the volatility of this equally weighted portfolio is closest to:

• A).17.
• B).41.
• C).14.
• D).37.

---

Definitions:

Financial Statements

Authorized documents reflecting the economic actions and condition of an organization, individual, or different party, often encompassing the balance sheet, income statement, and cash flow statement.

Common Shares

Equity securities that represent ownership in a corporation, giving shareholders voting rights and a residual claim on corporate earnings in the form of dividends.

Total Equity

Represents the value left in a company after all liabilities have been subtracted from assets, essentially the net assets owned by shareholders.