Your portfolio is invested 26 percent each in Stocks A and C, and 48 percent in Stock B. What is the standard deviation of your portfolio given the following information?
A)12.38 percent
B)12.64 percent
C)12.72 percent
D)12.89 percent
E)13.73 percent

Question

Your portfolio is invested 26 percent each in Stocks A and C, and 48 percent in Stock B. What is the standard deviation of your portfolio given the following information? 
A)12.38 percent 
B)12.64 percent 
C)12.72 percent 
D)12.89 percent 
E)13.73 percent

Quizplus · Accepted Answer

E(R_p)_Boom = 0.26(0.25) + 0.48(0.25) + 0.26(0.45) = 0.302E(R_p)_Good = 0.26(0.10) + 0.48(0.13) + 0.26(0.11) = 0.117E(R_p)_Poor = 0.26(0.03) + 0.48(0.05) + 0.26(0.05) = 0.0448E(R_p)_Bust = 0.26(-0.04) + 0.48(-0.09) + 0.26(-0.09) = -0.077E(R_p) = 0.25(0.302) + 0.25(0.117) + 0.25(0.0448) + 0.25(-0.077) = 0.0967F1F1F1S1F1F1F10_p² = 0.25(0.302 - 0.0967)² + 0.25(0.117 - 0.0967)² + 0.25(0.0448 - 0.0967)² + 0.25(-0.077 - 0.0967)² = 0.018856F1F1F1S1F1F1F10_p = F1F1F1S1F1F1F100.018856 = 13.73 percent

Your Portfolio Is Invested 26 Percent Each in Stocks a and C