Question 18

Given the following information, what is the standard deviation of the returns on a portfolio that is invested 40 percent in stock A, 35 percent in stock B, and the remainder in stock C?

Rate of Return is State Occurs

State of Economy Probability of State of economy Stock A Stock B Stock C

Normal .65 14.3% 16.7% 18.2%

Recession .35 -9.8% 5.4% -26.9%

Group of answer choices

12.72 percent

14.07 percent

1.41 percent

7.41 percent

11.86 percent