For the upcoming year, the risk-free rate is 2 percent, and the expected return to the market is 7 percent. You are also given the following covariance matrix for Securities J, K, and L. Covariance Security J Security J Security K Security L 0.0012532 0.0010344 0.0019711 0.0023717 0.0013558 Security K 0.0010344 Security L 0.0019711 0.0013558 0.0048442 Also assume that you form a portfolio by putting 0 percent of your funds in Security J, 40 percent of your funds in Security K, and 60 percent of your funds in Security L. Based on this information, determine the standard deviation of the resulting portfolio. O 6.47% 5.27% 4.98% 5.82% O 4.77%
For the upcoming year, the risk-free rate is 2 percent, and the expected return to the market is 7 percent. You are also given the following covariance matrix for Securities J, K, and L. Covariance Security J Security J Security K Security L 0.0012532 0.0010344 0.0019711 0.0023717 0.0013558 Security K 0.0010344 Security L 0.0019711 0.0013558 0.0048442 Also assume that you form a portfolio by putting 0 percent of your funds in Security J, 40 percent of your funds in Security K, and 60 percent of your funds in Security L. Based on this information, determine the standard deviation of the resulting portfolio. O 6.47% 5.27% 4.98% 5.82% O 4.77%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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For the upcoming year, the risk-free rate is 2 percent, and the expected return to the market is 7 percent. You are also given the following covariance matrix for Securities J,K, andL. \table[[Covariance,Security J,Security K,Security L],[Security J,0.0012532,0.0010344,0.0019711],[Security K,0.0010344,0.0023717,0.0013558],[Security L,0.0019711,0.0013558,0.0048442]] Also assume that you form a portfolio by putting 0 percent of your funds in Security J, 40 percent of your funds in Security K, and 60 percent of your funds in Security L. Based on this information, determine the standard deviation of the resulting portfolio. ◻ 6.47% 5.27% 4.98% 5.82% 4.77%
Transcribed Image Text:For the upcoming year, the risk-free rate is 2 percent, and the expected return to the market
is 7 percent. You are also given the following covariance matrix for Securities J, K, and L.
Covariance
Security J
Security J
Security K
Security L
0.0012532
0.0010344
0.0019711
0.0023717
0.0013558
Security K 0.0010344
Security L 0.0019711 0.0013558 0.0048442
Also assume that you form a portfolio by putting 0 percent of your funds in Security J, 40
percent of your funds in Security K, and 60 percent of your funds in Security L. Based on
this information, determine the standard deviation of the resulting portfolio.
O 6.47%
5.27%
4.98%
5.82%
O 4.77%
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