Respuesta :
Answer:
A portfolio consists of 40% in Security A and 60% in Security B. The covariance matrix for A is 144, 225; for B is 225, 81. The standard deviation for the portfolio is 12.7
Option D is correct
Explanation:
Wa: 0.4
Wb: 0.6
a^2: 144
b^2: 81
Cov(a,b): 225
Portfolio Variance:
: (0.4*0.4*144) + (0.6*0.6*81) + (2*0.4*0.6*225)
: 160.2
Portfolio Standard Deviation: 12.7
Answer:
Option d. Is the correct answer.
Explanation:
We are given
Wa = 40/100
Wa = 0.4
Wb = 60/100
Wb = 0.6
We are also give given the covariance as a,b
a² = 144
b² = 81
Therefore, the covariance will be
Cov(a,b) = 225
Portfolio Variance:
Variance =
(0.4×0.4×144) + (0.6×0.6×81) + (2×0.4×0.6×225)
Variance = 23.04 + 29.16 + 108
Variance = 160.2
Remember that, standard deviation is the square root of variance which we have has
Standard Deviation of the portfolio =√160.2
Standard Deviation of the Portfolio = 12.7
