Stock a Has Exhibited a Standard Deviation in Stock Returns

question 22

Multiple Choice

Stock A has exhibited a standard deviation in stock returns of 0.5, whereas Stock B has exhibited a standard deviation of 0.6. The correlation coefficient between the stock returns is 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:

Effect

The result or outcome that is produced by a cause or agent; it shows how something influences the state of something else.

Affect

The experience of feeling or emotion, which can influence an individual's perception and behavior.

Epidemic

A widespread outbreak of an infectious disease in a community at a particular time.

Idiom

A phrase or expression that has a figurative, sometimes literal, meaning different from the meanings of the individual words.