Stock a 'S Returns Have a Standard Deviation of 0

question 1

Multiple Choice

Stock A 's returns have a standard deviation of 0.5, and stock B's returns have standard deviation of 0.6. The correlation coefficient between A and B 0.5. What is the variance of a portfolio composed of 70 percent Stock A and 30 percent Stock B?

• A) 0.1549
• B) 0.2179
• C) 0.4668
• D) 0.5500

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Definitions:

Final Distribution

The process of allocating the remaining assets of a company, estate, or trust to the rightful beneficiaries or owners after all obligations have been met.

Market Value

The current price at which an asset or service can be bought or sold in the market.

Book Value

The value of a company or asset according to its financial statements, calculated by taking the total assets minus the liabilities and intangible assets.

Mortgage Payable

A liability account on the balance sheet representing the amount owed to a lender for property purchased.