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What is the standard deviation of the portfolio

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Reference no: EM132589575

Problem 1: Suppose you have a portfolio that is 30% in the risk-free asset and 70% in a stock. The stock has a standard deviation of 0.30 (i.e., 30%). What is the standard deviation of the portfolio?

0

0.09 (i.e., 9%)

0.21 (i.e., 21%)

0.30 (i.e., 30%)

Problem 2: Suppose you are buying one asset and shorting another asset (and the dollar value of the purchase and the short are the same). The standard deviation of this portfolio will be minimized if the two assets are:

  1. Negatively correlated with each other
  2. Positively correlated with each other

Reference no: EM132589575

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