Suppose You Plan to Create a Portfolio with Three Securities

Multiple Choice

Suppose you plan to create a portfolio with three securities: Dizzy (D) ,Lazy (L) ,and Crazy (C) .The expected returns for Dizzy,Lazy and Crazy are 6 percent,8 percent,and 10 percent,respectively.The standard deviation is 9 percent for Dizzy,15 percent for Lazy,and 12 percent for Crazy.The correlation coefficients among the returns for the three securities are: CORRDL= 0.6,CORRDC = -0.3,and CORRLC = 0.4.What is the portfolio standard deviation if 30 percent of the portfolio is in Dizzy and 40 percent is in Lazy?

A) 0.34%
B) 0.87%
C) 5.82%
D) 9.33%