Practice Exam Stocks,Misc. exam problems #1.6

[ebony]

An investor creates an equally weighted portfolio of the largest 3000 stocks. The variance of each stock's return is 70%, and the covariance amoung the returns on each pair of stocks is 50%. What is the standard deviation of the return on the portfolio?

a) 35%
b) 50%
c) 59%
d) 70%
e) 84%

I get 70%. I think they have a typo somewhere here and give 59% as the answer.

http://www.neas-seminars.com/discussions/shwmessage.aspx?ForumID=63&MessageID=5360

[carrytheCrøss]

The solutions sloppily use the given covariance value as the correlation. Given the values supplied in the question, I get 70.7%.

On a side note, in this thread (http://www.neas-seminars.com/discussions/shwmessage.aspx?ForumID=63&MessageID=5417), one poster graciously made a zip file of all previous practice exam questions months ago.

[ebony]

The solutions sloppily use the given covariance value as the correlation. Given the values supplied in the question, I get 70.7%.

On a side note, in this thread (http://www.neas-seminars.com/discussions/shwmessage.aspx?ForumID=63&MessageID=5417), one poster graciously made a zip file of all previous practice exam questions months ago.

Thank you for verifying my result and yes! thank you to the poster who took the time to make the zip file.