**Portfolio Standard Deviation Calculation - Educational Exercise**---**Question:**A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.4. What is the standard deviation of the portfolio?---**Options:**- **A.** 31.02%- **B.** 22.93%- **C.** 26.97%- **D.** 29.67%---**Explanation:**In this problem, you are calculating the standard deviation of a portfolio composed of two stocks, IBM and Microsoft (MSFT), which involves understanding how the volatility of each stock, their respective weights in the portfolio, and the correlation between them contribute to the overall portfolio risk.To solve this, you would use the formula for the standard deviation of a two-asset portfolio:\[ \sigma_p = \sqrt{(w_A \cdot \sigma_A)^2 + (w_B \cdot \sigma_B)^2 + 2 \cdot w_A \cdot w_B \cdot \sigma_A \cdot \sigma_B \cdot \rho_{A,B} } \]where:- $ \sigma_p $ is the standard deviation of the portfolio.- $ w_A $ and $ w_B $ are the weights of IBM and MSFT in the portfolio, respectively.- $ \sigma_A $ and $ \sigma_B $ are the volatilities (standard deviations) of IBM and MSFT, respectively.- $ \rho_{A,B} $ is the correlation coefficient between the returns of IBM and MSFT.Given:- $ w_{IBM} = 0.30 $- $ w_{MSFT} = 0.70 $- $ \sigma_{IBM} = 35\% = 0.35 $- $ \sigma_{MSFT} = 30\% = 0.30 $- $ \rho_{IBM,MSFT} = 0.40 $---By substituting these values into the formula, you can determine the standard deviation of the portfolio.

A portfolio has 30% of its value in IBM shares.And of its value in MSFT.Volatility of IBM is…

Answered: A portfolio has 30% of its value in IBM…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

See similar textbooks

Similar questions

Provide answer.
Please answer B and C. The Knowles/Armitage (KA) group at Merrill Lynch advises clients on how to create a diversified investment portfolio. One of the investment alternatives they make available to clients is the All World Fund composed of global stocks with good dividend yields. One of their clients is interested in a portfolio consisting of investment in the All World Fund and a treasury bond fund. The expected percent return of an investment in the All World Fund is 10% with a standard deviation of 17.60% . The expected percent return of an investment in a treasury bond fund is 5.90% and the standard deviation is 3.60%. The covariance of an investment in the All World Fund with an investment in a treasury bond fund is -14.5. b. If KA recommends that the client invest 75% in the All World Fund and 25% in the treasury bond fund, what is the expected percent return and standard deviation for such a portfolio? What would be the expected return and standard deviation, in dollars, for…
A researcher measured the following correlation: r=.21. What is the value of the coefficient of determination? A. -0.42 B. .04 C. .42 D. -.04
36 Which is the strongest (highest) r correlation: -0.9000 -0.6000 -0.3000 0.4500
Can a low barometer reading be used to predict maximum wind speed of an approaching tropical cyclone? Let x be the lowest pressure (in millibars) as a cyclone approaches, and let y be the maximum wind speed (in miles per hour) of the cyclone. Suppose a random sample of cyclones gave the following information. x 1014 935 980 955 995 y 50 80 60 135 84 Would you say the correlation is low, moderate, or strong? Positive or negative? If necessary, draw a scatter diagram of the given data. Question 1 options: moderate and negative low and negative strong and negative low and positive moderate and positive
Create different portfolios with weights (weightS&P, weightBond) where weightBond = 1 weightS&P. Let weightS&P equal 0%, 10%, 20%, 100%. Calculate the average return and the standard deviation for each of the eleven portfolios. Which of the following portfolio has the lowest risk (as measured by the standard deviation) ? The portfolio with 0% weight in the S&P500. The portfolio with 20% weight in the S&P500. The portfolio with 40% weight in the S&P500. The portfolio with 60% weight in the S&P500.
Closing price of two stocks are recorded for 50 days. The sample standard deviation of stock X is 7.240 and the sample standard deviation of stock Y is 9.833. The sample covariance is -$22.075. What is the correlation coefficient?
It is believed that standardized test scores, such as SAT, is a good predictor of first-year college students' GPA. 750 1200 3.2 1120 1000 1420 1280 1100 2.5 2.7 3.5 2.9 2.2 2.3 1. Find the p-value to determine if there is a linear correlation between SAT scores and GPA. Record the p- value below. Round to four decimal places. p-value = 2. Is there a linear correlation between SAT scores and GPA? 3. If there is a linear correation, write the correlation coefficient below. Otherwise, leave it blank. Round your final answer to four decimal places. T= 4. If there is a linear correlation, write the regression equation below. Otherwise, leave it blank. Round all numbers to four decimal places. 5. Using the data shown above, predict a student's first-year GPA when the student scores a 1275 on the SAT. Round your final answer to two decimal places. 6. If there is a linear correlation, what percentage of variation in GPAS can be explained by students' SAT scores? If there is not a linear…
Pax World Balanced is a highly respected, socially responsible mutual fund of stocks and bonds. Vanguard Balanced Index is another highly regarded fund that represents the entire U.S. stock and bond market (an index fund). The mean and standard deviation of annualized percent returns are shown below. The annualized mean and standard deviation are for a recent 10-years period.†. If x represents return and s represents risk, then explain why the coefficient of variation can be taken to represent risk per unit of return. From this point of view, which fund appears to be better? Explain. A. Since the CV is s/s2 we can say that the CV represents the risk per unit of return; the Pax fund appears to be better because the CV is smaller. B. Since the CV is s/s2 we can say that the CV represents the risk per unit of return; the Vanguard fund appears to be better because the CV is smaller. C. Since the CV is s/x we can say that the CV represents the risk per unit of return; the Pax fund…
Statistics Question
man.2
Which of the following sets of correlations shows the highest to lowest degree of relationship? A. +.70, +.15, -.10, -.85 B. -.85, +.70, -.10, +.15 C. +.70, +.15, -.85, -.10 D. -.85, +.70, +.15, -.10 E. -.10, +.15, +.70, -.85

SEE MORE QUESTIONS

Recommended textbooks for you

MATLAB: An Introduction with Applications

Statistics

ISBN:

9781119256830

Author:

Amos Gilat

Publisher:

John Wiley & Sons Inc

Probability and Statistics for Engineering and th…

Statistics

ISBN:

9781305251809

Author:

Jay L. Devore

Publisher:

Cengage Learning

Statistics for The Behavioral Sciences (MindTap C…

Statistics

ISBN:

9781305504912

Author:

Frederick J Gravetter, Larry B. Wallnau

Publisher:

Cengage Learning

MATLAB: An Introduction with Applications

Statistics

ISBN:

9781119256830

Author:

Amos Gilat

Publisher:

John Wiley & Sons Inc

Probability and Statistics for Engineering and th…

Statistics

ISBN:

9781305251809

Author:

Jay L. Devore

Publisher:

Cengage Learning

Statistics for The Behavioral Sciences (MindTap C…

Statistics

ISBN:

9781305504912

Author:

Frederick J Gravetter, Larry B. Wallnau

Publisher:

Cengage Learning

Elementary Statistics: Picturing the World (7th E…

Statistics

ISBN:

9780134683416

Author:

Ron Larson, Betsy Farber

Publisher:

PEARSON

The Basic Practice of Statistics

Statistics

ISBN:

9781319042578

Author:

David S. Moore, William I. Notz, Michael A. Fligner

Publisher:

W. H. Freeman

Introduction to the Practice of Statistics

Statistics

ISBN:

9781319013387

Author:

David S. Moore, George P. McCabe, Bruce A. Craig

Publisher:

W. H. Freeman

SEE MORE TEXTBOOKS

A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.4. What is the standard deviation of the portfolio? A. 31.02% B. 22.93% C. 26.97% D. 29.67%