An Investor Constructs a Portfolio with a 75 Percent Allocation

question 73

Multiple Choice

An investor constructs a portfolio with a 75 percent allocation to a stock index and a 25 percent allocation to a risk-free asset. The expected returns on the risk-free asset and the stock index are 3 percent and 10 percent, respectively. The standard deviation of returns on the stock index is 14 percent. Calculate the expected standard deviation of the portfolio.

• A) 7.5 percent
• B) 9.0 percent
• C) 10.5 percent
• D) 11.5 percent
• E) 13.0 percent

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