Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation of 8 percent per year.The correlation between stock A and stock B is .40.You have a portfolio of these two stocks wherein stock B has a portfolio weight of 40 percent.What is your portfolio variance?
A) 0.01143
B) 0.01214
C) 0.01329
D) 0.01437
E) 0.01470

Question

Quizplus · Accepted Answer

Var_Port = [(1 - 0.40)² × 0.15²] + [0.40² × 0.08²] + [2 × (1 - 0.40) × 0.40 × 0.15 × 0.08 × 0.040] = 0.011428

Stock a Has a Standard Deviation of 15 Percent Per