Stock X has a standard deviation of 21 percent per year and stock Y has a standard deviation of 6 percent per year.The correlation between stock A and stock B is 0.38.You have a portfolio of these two stocks wherein stock X has a portfolio weight of 42 percent.What is your portfolio standard deviation?
A) 8.89 percent
B) 9.85 percent
C) 10.64 percent
D) 11.84 percent
E) 12.92 percent

Question

Quizplus · Accepted Answer

Var_Port = [0.42² × 0.21²] + [(1 - 0.42)² × 0.06²] + [2 × 0.42 × (1 - 0.42) × 0.21 × 0.06 × 0.38] = 0.011323 Std Dev_Port = √0.011323 = 10.64 percent

Stock X Has a Standard Deviation of 21 Percent Per