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A Portfolio Total Risk Calculation

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Iggy Bokie own a portfolio composed of three securities with the following characteristics.

Security Beta Standard-Deviation Random-Error-Term Market Index
A 1.20 5% .30
B 1.05 8% .50
C 0.90 2% .20

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

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Solution Summary

The solution calculates the total risk of a portfolio comprising three securities using beta of securities, standard deviation of the market index and the random error terms.

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