Which of the Following Regarding the Mean and Variance of a Portfolio

question 94

Multiple Choice

Which of the following regarding the mean and variance of a portfolio of two stocks is false?

• A) \[E \left( R _ { y } \right) = \left( w _ { 1 } + w _ { 2 } \right) \left[ E \left( R _ { 1 } \right) + E \left( R _ { 2 } \right) \right]\]
• B) \[V \left( R _ { y } \right) = w _ { 1 } ^ { 2 } V \left( R _ { 1 } \right) + w _ { 2 } ^ { 2 } V \left( R _ { 2 } \right) + 2 w _ { 1 } w _ { 2 } \operatorname { COV } \left( R _ { 1 } R _ { 2 } \right)\]
• C) \[V \left( R _ { y } \right) = w _ { 1 } ^ { 2 } \sigma _ { 1 } ^ { 2 } + w _ { 2 } ^ { 2 } \sigma _ { 2 } ^ { 2 } + 2 w _ { 1 } w _ { 2 } \rho \sigma _ { 1 } \sigma _ { 2 }\]
• D) \[E \left( R _ { y } \right) = w _ { 1 } E \left( R _ { 1 } \right) + w _ { 2 } E \left( R _ { 2 } \right)\]

Comprehend the role of a team leader or facilitator in guiding discussions and keeping team members focused on objectives.

Learn problem-solving process stages and the importance of criteria development for solution evaluation.

Distinguish between effective and ineffective meeting strategies in problem-solving contexts.

Discover the significance of collaborative participation in generating and refining solutions in team meetings.

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Definitions:

Stabilization Policy

Economic strategies and actions taken by a government or central bank to stabilize an economy, aiming to reduce fluctuations in the business cycle.

Market Participants

Individuals or entities engaging in buying, selling, or other transactions in markets.

Rational Expectations Theory

A principle that asserts that outcomes will not systematically deviate from what people expected them to be, because individuals use all available information to make forecasts.

Fed

Short for the Federal Reserve System, it's the central banking system of the United States responsible for monetary policy.