Use the Table for the Question(s) Below

question 97

Multiple Choice

Use the table for the question(s) below.
Consider the following covariances between securities:

-Which of the following formulas is INCORRECT?

• A) Variance of an equally Weighted Portfolio = (1 - )(Average Variance of Individual Stocks) + (Average covariance between the stocks)
• B) Variance of a portfolio =
• C) Variance of a portfolio =
• D) Variance of a portfolio =

---

Definitions:

Duration

The measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, often expressed in years.

Coupon Bond

A type of bond that pays the holder interest payments at fixed intervals (usually annually or semi-annually) until the bond matures, at which point the principal amount is repaid.

Interest-Rate Risk

The potential for investment losses that result from a change in interest rates, affecting the value of fixed-income securities inversely.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturation date, accounting for interest payments and the difference between purchase price and par value.