- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 1. Portfolio Risk and Return: Part I
- Subject 2. Risk Aversion and Portfolio Selection
CFA Practice Question
The standard deviation of a portfolio that has 40% of its value invested in a risk-free asset and 60% of its value invested in a risky asset with a standard deviation of 40% is ______.
B. 24%
C. 40%
A. 18%
B. 24%
C. 40%
Correct Answer: B
40% x 60% = 24%
User Contributed Comments 5
| User | Comment |
|---|---|
| poomie83 | Which 40% figure is being used here? Is it the risk free asset or the std dev? |
| thekobe | recall that the risk free asset has zero variance, so the total variance can be calculated as: (weight in risk investment) times (std dev risk investment) |
| moneyguy | (.40)(0) + (.60)(.40) = .24 |
| bidisha | thanks moneyguy |
| ZainabA | he just used this formula SD(p)=(1-w1)*(SDrisky) w1 is given already ==>SD(p)=(60%)*(40%)=24% |