A Portfolio Is Composed of Two Stocks,A and B

question 40

Multiple Choice

A portfolio is composed of two stocks,A and B. Stock A has a standard deviation of return of 35% while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is 0.45. Stock A comprises 40% of the portfolio while stock B comprises 60% of the portfolio. The standard deviation of the return on this portfolio is _________.

• A) 23.00%
• B) 19.76%
• C) 18.45%
• D) 17.67%

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Definitions:

Defined Contribution Plans

A type of retirement savings plan where the amount of the employer's annual contribution is specified, with the future retirement benefits depending on the investment's performance.

Defined Benefit Plans

A type of pension plan where an employer promises a specified pension payment upon retirement, based on the employee's earnings history, tenure of service, and age.

Portable

Refers to something that is easily movable or transferable from one context or use to another.

Notice Periods

Duration of time employees are required to continue working between informing their employer of their departure and their last working day.