The Standard Deviation of a Portfolio

question 48

Multiple Choice

The standard deviation of a portfolio:

• A)is a measure of that portfolio's systematic risk.
• B)is a weighed average of the standard deviations of the individual securities held in that portfolio.
• C)measures the amount of diversifiable risk inherent in the portfolio.
• D)serves as the basis for computing the appropriate risk premium for that portfolio.
• E)can be less than the weighted average of the standard deviations of the individual securities held in that portfolio.

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Definitions:

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Interest Rate

The levy imposed on a borrower by a lender, shown as a percentage of the borrowed foundational amount, for access to assets.

Cash Flows

The movement of cash into and out of a business, a critical aspect of its financial health, emphasizing liquidity.

Years

Units of time equal to 365 days or 366 days in a leap year, used as a measurement of time.