A Portfolio Has 25% of Its Funds Invested in Security

question 47

Multiple Choice

A portfolio has 25% of its funds invested in Security C and 75% of its funds invested in Security C has an expected return of 8% and a standard deviation of 6%. Security B has an expected return of 10% and a standard deviation of 10%. The securities have a coefficient of correlation of .6. Which of the following values is closest to portfolio return and variance?

• A) .095; .001675.
• B) .095; .0072.
• C) .100; .00849.
• D) .090; .0081.

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Definitions:

Investment Account

An account held at a financial institution that is used for the purpose of investing in securities such as stocks, bonds, and mutual funds.

Liabilities

Liabilities are the economic debts or responsibilities that a business has to other entities, which are to be fulfilled over time by transferring economic resources.

Equity Method

An accounting method used to assess the profits earned through an investment by recognizing income and dividends from the invested entity.