A Portfolio Has 30% of Its Value in IBM Shares

question 8

Multiple Choice

A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT) . The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.5. What is the standard deviation of the portfolio?

• A) 23.61%
• B) 27.78%
• C) 31.95%
• D) 30.56%

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Definitions:

Fixed Period Cost

Costs that remain constant for a specific period of time regardless of the level of output or activity.

Administrative Cost

Expenses related to the general operation of a company, including office salaries, utilities, and legal fees, but not including production costs.

Toll-free Telephone Line

A phone number that allows callers to reach businesses without incurring charges, often used for customer support.

Period Cost

Expenses that are not directly tied to the production process and are incurred regardless of the volume of production, such as selling, general, and administrative expenses.