You are considering two mutual funds. The first is a stock fund and the second is a long-term government and corporate bond fund. The stock fund has an expected return of 20% and a variance of 0.36. The bond fund has an expected return of 8% and a variance of 0.16. The correlation coefficient between the stock and bond funds is 0.3. If you create an equally-weighted portfolio by using these two funds, what is your portfolio's standard deviation? OA.0.166 OB.0.407 OC.0.335 OD.0.283

You are considering two mutual funds. The first is a stock fund and the second is a long-term government and corporate bond fund. The stock fund has an expected return of 20% and a variance of 0.36. The bond fund has an expected return of 8% and a variance of 0.16. The correlation coefficient between the stock and bond funds is 0.3. If you create an equally-weighted portfolio by using these two funds, what is your portfolio's standard deviation? OA.0.166 OB.0.407 OC.0.335 OD.0.283

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 15MC

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Question

v. 2

You are considering two mutual funds. The first is a stock fund and the second is a long-term government and corporate bond
fund. The stock fund has an expected return of 20% and a variance of 0.36. The bond fund has an expected return of 8% and a
variance of 0.16. The correlation coefficient between the stock and bond funds is 0.3. If you create an equally-weighted portfolio
by using these two funds, what is your portfolio's standard deviation?
OA.0.166
OB.0.407
OC.0.335
OD.0.283

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