Portfolio Management Q52
0. Selected information about shares of two companies is provided below:
| ABC Corporation | XYZ Corporation | |
| Standard deviation | 25% | 30% |
| Correlation of returns | 0.24 | |
| Portfolio weights | 40% | 60% |
The standard deviation of returns of the portfolio formed with these two stocks is closest to:
- Option : B
- Explanation : Portfolio standard deviation = √ (0.25)² (0.4)² + (0.3)² (0.6)² + 2 (0.24) (0.4) (0.6) (0.25) (0.3) = 0.2259.
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