Question

Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets...

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) = 15%

σP = 8.5%

T-Bill rate = 3%

Proportion of complete Portfolio in P = 70%

Proportion of complete Portfolio in T-Bills = 30%

Composition of P:

Stock A

Stock B

Stock C

30%

50%

20%

What is the standard deviation of Emma's complete portfolio?

Select one:

a. 6.45%

b. 5.95%

c. 7.78%

d. 3.21%

e. 8.64%

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Answer #1

Answer - Option B. 5.95%

Standard deviation of risk free asset and its correlation with any other asset = 0

standard deviation = 5.95%

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