Share
Explore BrainMass

Standard Deviation and risk of a portfolio

1) Consider two securities, A and B, with standard deviations of 30% and 40%, respectively. Calculate the standard deviation of a portfolio weighted equally between the two securities if their correlation is:

1. 0.9
2. 0.0
3. -0.9

2) Jean Smith owns a portfolio composed of three securities with the following characteristics:

Security Beta Standard Deviation Random Error Term Proportion
A 1.20 5% 0.30
B 1.05 8% 0.50
C 0.90 2% 0.20

If the standard deviation of the market index is 18%, what is the total risk of Jean's portfolio?

Attachments

Solution Summary

The solution calculates standard deviation and risk of a portfolio.

$2.19