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A portfolio was created by investing 25% of the funds in asset A (standard deviation - 15%) and the balance of the funds in a
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Answer #1

Answer :- Option B--> 10.6%

Calculation :-

Variance = [ (Weight of A)2 * ( standard deviation of stock A)2 ] + [ (Weight of B)2 * ( standard deviation of stock B)2 ] + [ 2 * weight of stock A * standard deviation of stock A * weight of stock B * standard deviation of stock B * Correlation Coefficient of A & B ]

Variance = [ (.25)2 * (15)2 ] + [ (.75)2 * (10)2 ] + [ 2 * 0.25 * 15 * 0.75 * 10 * 0.75 ]

Variance = [ 14.0625 ] + [ 56.25 ] + [ 42.1875 ]

Variance = 112.5

Standard Deviation = Variance1/2

    =(112.5)1/2

= 10.60

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