A Portfolio Is Made Up of 75% of Stock 1,and

question 129

Essay

A portfolio is made up of 75% of stock 1,and 25% of stock 2. Stock 1 has a variance of .08,and stock 2 has a variance of .035. The covariance between the stocks is -.001. Calculate both the variance and the standard deviation of the portfolio.

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Definitions:

Investment Earnings

The return on investment, including income and capital gains.

Traditional IRA

A retirement savings account that allows individuals to make pre-tax contributions, with taxes on earnings deferred until withdrawals begin.

Annual Return

The percentage change in the value of an investment over a one-year period, including dividends and interest.

After-taxes

Refers to income or financial figures that remain following the deduction of all applicable taxes, often used to assess the true net gain or financial status of an individual or entity.