Question

Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets ( P) and T-Bills. The information below refers to these assets. E(Rp) 12.00 % Standard Deviation of P 7.20 % T-Bill rate 3.60 % Proportion of Complete Portfolio in P 80 % Proportion of Complete Portfolio in T-Bills 20 % Composition of P: Stock A 40.00 % Stock B 25.00 % Stock C 35.00 % Total 100.00 % What is the standard deviation of Bo's complete portfolio?

A.10.32%
B. 5.28%
C. 9.62%
D. 8.44%
E. 7.58%

Answer 1

Answer:

The correct answer is 5.76%

Explanation:

Std. Dev. of C = (80/100) × 7.20% + (20/100) × 0%

Std. Dev. of C = (80/100) × 7.20%

Std. Dev. of C = .8 × 7.20% = 5.76%.