An Investor Wishes to Construct a Portfolio Consisting of a 70

Multiple Choice

An investor wishes to construct a portfolio consisting of a 70 percent allocation to a stock index and a 30 percent allocation to a risk-free asset. The return on the risk-free asset is 4.5 percent, and the expected return on the stock index is 12 percent. The standard deviation of returns on the stock index is 6 percent. Calculate the expected standard deviation of the portfolio.

A) 4.20 percent
B) 25.20 percent
C) 3.29 percent
D) 10.80 percent
E) 5.02 percent