Question
1. Siggy Boski owns a portfolio composed of three securities with the following characteristics: Standard Deviation of Security Beta Random Error Term Proportion A 1.20
1. Siggy Boski owns a portfolio composed of three securities with the following characteristics:
Standard Deviation of
Security Beta Random Error Term Proportion
A 1.20 5% 0.3
B 1.10 8% 0.3
C 0.90 2% 0.4
If the standard deviation of the market index is 18%, what is the total risk of Siggy's portfolio?
2. Assume that the expected return on the market portfolio is 12% and its standard deviation is 10%. The riskfree rate is 4%. What is the standard deviation of a well-diversified (no non-market-risk) portfolio with an expected return of 16%?
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Accounting Principles
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
10th Edition
1119491630, 978-1119491637, 978-0470534793
