A Portfolio Consists of Two Securities: Nervy and Goofy

question 54

Multiple Choice

A portfolio consists of two securities: Nervy and Goofy.The expected return of Nervy is 12 percent with a standard deviation of 15 percent.The expected return of Goofy is 9 percent with a standard deviation of 10 percent.What is the portfolio standard deviation if 35 percent of the portfolio is in Nervy and the two securities have a correlation of 0.6?

• A) 9.02%
• B) 10.52%
• C) 11.75%
• D) 12.18%

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Definitions:

Expected NPV

The anticipated net present value of a project, investment, or financial strategy, calculated by integrating all possible outcomes weighted by their probabilities.

Full-Ride Scholarship

A scholarship that covers all expenses of a student's education, including tuition, room, board, and sometimes additional costs like books and fees.

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1.

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The average period that a person is expected to live, which can vary significantly across different countries and communities.