Your current portfolio has a value of $30,000, with an expected return of 15%, and a standard deviation of 20%. You decide you wantto purchase $6,000 of XYZ, which has an expected return of 13%, a standard deviation of 30%, and is perfectly negatively correlatedto your current portfolio. What will be your new portfolio's standard deviation after the addition of XYZ?O 5.3%O 31.8%O 20.6%O 11.7%

First we need to determine the weight of each asset in the new portfolio. This can be determined…

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What will be your new portfolio's standard deviation after the addition of XYZ?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13P

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Question

Your current portfolio has a value of $30,000, with an expected return of 15%, and a standard deviation of 20%. You decide you want
to purchase $6,000 of XYZ, which has an expected return of 13%, a standard deviation of 30%, and is perfectly negatively correlated
to your current portfolio. What will be your new portfolio's standard deviation after the addition of XYZ?
O 5.3%
O 31.8%
O 20.6%
O 11.7%

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