Determine standard deviation of the portfolio, Finance Basics

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Determine standard deviation of the portfolio

Problem:

A portfolio has 40% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 40% and 30%, respectively, and the correlation between IBM and MSFT is -0.3.

Required:

Question: What is the standard deviation of the portfolio?

A. 19.95%

B. 18.65%

C. 22.17%

D. 20.18%

Note: Show all workings.

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Finance Basics: Determine standard deviation of the portfolio

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Finance Basics: Determine standard deviation of the portfolio

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