A Portfolio Has 25% of Its Value in ASX Shares

question 32

Multiple Choice

A portfolio has 25% of its value in ASX shares and the rest in Woodside Petroleum (WPL) . The volatilities of ASX and WPL are 40% and 20%, respectively, and the correlation between ASX and WPL is -0.5. What is the standard deviation of the portfolio?

• A)13.65%
• B)14.95%
• C)12.17%
• D)13.23%

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Definitions:

Inferential Statistics

Statistical methods used to draw conclusions or make predictions about a population based on a sample.

Statistically Meaningful

Refers to results in data analysis that are unlikely to have occurred by chance and therefore indicate a significant effect or relationship.

Scientific Enterprise

The organized and systematic pursuit of knowledge involving the observation, identification, description, experimental investigation, and theoretical explanation of phenomena.

Ideal Scientist

A conceptual model of a scientist who embodies the virtues of curiosity, skepticism, objectivity, and the ethical pursuit of knowledge.