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The standard deviation of a portfolio: Multiple Choice is a weighted average of the standard deviations...

The standard deviation of a portfolio:

Multiple Choice

  • is a weighted average of the standard deviations of the individual securities held in the portfolio.

  • can never be less than the standard deviation of the most risky security in the portfolio.

  • must be equal to or greater than the lowest standard deviation of any single security held in the portfolio.

  • is an arithmetic average of the standard deviations of the individual securities which comprise the portfolio.

  • can be less than the standard deviation of the least risky security in the portfolio.

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Answer #1

Standard deviation quantifies the variation from the average returns of a data set. It uses the returns to an investment to measure the investment’s volatility.

Standard deviation of a portfolio measures the variability of the expected rate of return of a portfolio.

Standard deviation of a portfolio can be less than the standard deviation of the least risky security in the portfolio.

Hence, the answer is option e.

In case of any query, kindly comment on the solution.

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