A portfolio consists of two securities: a 90-day T-bill and the S&P/TSX Composite.The expected return on the T-bill is 4.5%.The expected return on the S&P/TSX Composite is 12% with a standard deviation of 20%.What is the portfolio standard deviation if the expected return for this portfolio is 15%?
A)8.13%
B)12.00%
C)16.80%
D)28.00%

Question

Quizplus · Accepted Answer

The expected return of the portfolio is higher than the expected return of the S&P/TSX Composite, which implies leverage. The portfolio standard deviation would be higher than the standard deviation of the S&P/TSX Composite, which is 20%. Therefore, 28% is the only feasible option.

A Portfolio Consists of Two Securities: a 90-Day T-Bill and the S&P/TSX