Standard deviation Formula

CFA Level III
#1

Hi All,

I am confused on when use the general formula to calculate St deviation and when basically compute it by inputting the weights.

I will put two examples of the Exam 1 of Kaplan Schweser:

In Q6A the standard deviation of the portfolio is calculated using its formula and assuming the correlation is 0 (squaring the numbers, adding them and then doing the root) But in a similar problem, in Q9B, the standard deviation is calculated simply using their weights and adding them together. Why? I do understand in which situations we have to use the formula or simply using the weights as in 9b… Could you please clarify? Thank you

S

#2

Simply using the weights is just approximation, therefore may be overstated. However, Schweser says it may be used if correlation among the assets is 1.

#3

Would you use the full calculation in the exam or the normal weighting?

if you look at the Schweser online assessments it uses weightings?

#4

Would you use the full calculation in the exam or the normal weighting?

if you look at the Schweser online assessments it uses weightings?

#5

It confusing… I still don’t know in what cases uses one or another.