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Calculating the portfolio standard deviation

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You own a portfolio that has 35% invested in asset A, and 65% invested in asset B. Asset A's standard deviation is 12% and asset B's standard deviation is 18%. The correlation coefficient between the two assets is -0.7. The expected return on the portfolio is 13%. What is the portfolio standard deviation?

1. 8.5%
2. 9.3%
3. 7.2%
4. 15.3%

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Solution Summary

Solution describes the steps to calculate the portfolio standard deviation.

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Weight of A=p1=35%
Weight of B=p2=65%
Standard deviation of A=sigma 1=12%
Standard deviation of B=sigma ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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