A Portfolio Has 40% of Its Value in IBM Shares

question 57

Multiple Choice

A portfolio has 40% of its value in IBM shares and the rest in Microsoft (MSFT) . The volatility of IBM and MSFT are 40% and 30%, respectively, and the correlation between IBM and MSFT is -0.3. What is the standard deviation of the portfolio?

• A) 19.17%
• B) 18.16%
• C) 22.20%
• D) 20.18%

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Definitions:

Research Hypothesis

A testable prediction about the relationship between variables that the researcher proposes to explore.

Theoretical Average

Refers to the mean value that is expected or predicted on the basis of a theory or a model.

Population

The entire group of individuals or instances about whom the research may provide conclusions.

Group

A collection of individuals assembled for the purpose of conducting a study or observed in research, characterized by shared traits or conditions.