What Is the Standard Deviation of a Portfolio of Two

question 37

Multiple Choice

What is the standard deviation of a portfolio of two stocks given the following data? Stock A has a standard deviation of 18%.Stock B has a standard deviation of 14%.The portfolio contains 40% of stock A and the correlation coefficient between the two stocks is -.23.

• A) 9.7%
• B) 12.2%
• C) 14.0%
• D) 15.6%

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Definitions:

Accounts Receivable

Amounts owed to a company by customers for goods or services provided on credit.

Uncollectible Accounts

Accounts receivable that a company has deemed uncollectible from debtors, leading to their classification as bad debts.

Credit Policy

Guidelines a company utilizes to determine to whom to extend credit and under what terms, impacting its risk and customer relations.

Bad Debt Expense

An expense reported on the income statement, reflecting the cost of accounts receivable that a company does not expect to collect due to customer defaults.