What is the standard deviation of a portfolio of two stocks given the following data: stock a has a standard deviation of 18%. stock b has a standard deviation of 14%. the portfolio contains 40% of stock a, and the correlation coefficient between the two stocks is -.23.

Standard deviation = 9.73%

Explanation:

σP =

where:

wA = the portfolio weight of the first asset

wB = the portfolio weight of the second asset

σA= the standard deviation of the first asset

σB = the standard deviation of the second asset

cov(A,B) = the covariance of the two assets, which can also be expressed as: σAσBp(A,B), where p(A,B) is the correlation coefficient between the two assets

σP = ==9.73%

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