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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 0.5. What is the standard deviation of the portfolio excel?

Respuesta :

kirantariq1008

Answer:

The standard deviation of the portfolio is 26.15%

Explanation:

First the formula of variance of a portfolio is used.

Take the square root of variance to get standard deviation.

(0.3)^2 × (0.35)^2 + (0.7)^2 × (0.3)^2 + 2 × 0.3 × 0.7 × 0.35 × 0.3 × 0.3 = 0.068355

Taking square root of 0.068355 to get standard deviation that is 26.15%