Asked by Peter Manyang Bichok on Jun 24, 2024
Verified
A portfolio is comprised of five risky stocks. The standard deviations of these stocks are 5.6%, 12.8%, 2.3%, 8.9%, and 10.2%. The standard deviation of the portfolio:
A) Is equal to the arithmetic average of the individual standard deviations.
B) Must be greater than 2.3%.
C) Must equal that of the market.
D) Is equal to the weighted average of the individual standard deviations.
E) Cannot be determined from the information provided.
Standard Deviation
A measure of the amount of variation or dispersion of a set of values, commonly used in finance to measure the volatility of an investment's return.
Risky Stocks
Investments in the stock market that carry a high level of risk, typically due to volatility, lack of predictability, or the potential for substantial loss.
Market
A medium that allows buyers and sellers to exchange goods, services, or information.
- Comprehend the relevance of the linkage between portfolio stocks and their contribution to the fluctuation in portfolio variance.
Verified Answer
Learning Objectives
- Comprehend the relevance of the linkage between portfolio stocks and their contribution to the fluctuation in portfolio variance.
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