Question
Use the following information to determine which of the statements (might be more than one), that are below the table, is correct. Stock 1 Stock
Use the following information to determine which of the statements (might be more than one), that are below the table, is correct.
Stock 1 | Stock 2 | Stock 3 | Risk-free asset | Portfolio I | |
Expected return | 20% | 25% | 10% | 5% | 15% |
Standard deviation | 3.45% | 4.76% | 1.89% | 0.00% | 2.66% |
Portfolio I was formed equally-weighting the 3 stocks and the risk-free asset.
Question 21 options:
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If you want to increase the standard deviation of the portfolio, you would need to invest less in stock 3, in the risk-free asset, or in both.
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If you want to decrease the standard deviation of the portfolio, you would need to invest less in stock 3, in the risk-free asset, or in both.
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If you want a portfolio with a standard deviation higher than 3.50%, you would need to invest more than 25% in stock 2
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If you want a portfolio with a standard deviation lower than 1.50%, you would need to invest more than 25% in stock 3
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