Tag | Value |
---|---|
file | Probability_uva-variance-655-en_uva-variance-655-en |
name | uva-variance-655-en |
section | Probability/Elementary Probability/Random variables/Variance |
type | num |
solution | 0.1265 |
tolerance | 0 |
Type | Calculation |
Language | English |
Level | Statistical Literacy |
IRT-Difficulty | 2 |
p-value | 0.5905 |
Carla invests 30% of her funds in government bonds and 70% in a fund of common stocks. The return on an investment over a given period is the percentage change in price during this period. If X is the annual return of the government bonds is and Y is the annual return on stocks, then the return on the entire equity portfolio is R = 0.3X + 0.7Y.‖ From a data set (dataset) of the yield in its stock portfolio over the period from 1995 to 2010, you see below data on the expectation values, the standard deviations, and on the correlations between X and Y. Based on this data, we have:
———————————————- —————- —————– X= annual government bond yield μX = 4.5% σX = 3.9% Y = annual return on equities μX = 14.2% σX = 18.2% Correlation between X and Y -0.12 ———————————————- —————- —————–
What is the standard deviation of the return (σR) of the investments expressed as a percentage? Round to two decimal places.
The correct answer is: 0.1265