What Is the Standard Deviation of a Portfolio That Is

question 22

Multiple Choice

What is the standard deviation of a portfolio that is invested 40% in stock Q and 60% in stock R? $$\begin{array} { l l c c c } \text { State of } & \text { Probability of } & { \text { Returns if State Occurs } } \\\text { Economy } & \text { State of Economy } & \text { Stock } Q & \text { Stock R } \\\text { Boom }&25\% & 18 \% & 9 \% \\ \\\text { Normal }& 75 \% & 9 \% & 5 \%\\\end{array}$$

• A)0.7%
• B)1.4%
• C)2.6%
• D)6.8%
• E)8.1%

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Definitions:

Manufacturing Process

Encompasses the procedures and methods used to turn raw materials into finished goods through various phases of production.

Effective Annual Rate

The actual return on an investment after accounting for compounding interest over a year, providing a true reflection of financial returns.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including repayment schedule and interest rates.

Merchandise

Goods or products that are bought and sold in commerce, typically in a retail environment.