A Portfolio Has 40% of Its Value in IBM Shares

question 18

Multiple Choice

A portfolio has 40% of its value in IBM shares and the rest in Microsoft (MSFT) .The volatility of IBM and MSFT are 40% and 30%,respectively,and the correlation between IBM and MSFT is -0.3.What is the standard deviation of the portfolio?

• A)19.95%
• B)18.65%
• C)22.17%
• D)20.18%

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Definitions:

Authorized Shares

The maximum number of shares a corporation is legally allowed to issue, as specified in its articles of incorporation.

Paid-In Capital

The total amount of money that shareholders have invested in a company through the purchase of stock.

Issue Price

This refers to the price at which new securities are issued to the public or to investors by the issuing company.

Par Value

The nominal or face value of a stock or bond, as stated by the issuing corporation.