Which One of the Following Statements Is Correct About a Portfolio

question 416

Multiple Choice

Which one of the following statements is correct about a portfolio that is invested 30% in stock A, 40% in stock B, and 30% in stock C?

• A) The expected return on the portfolio is equal to the summation of the returns on the individual securities within the portfolio divided by three.
• B) The standard deviation of the portfolio is equal to the summation of the weights of each security multiplied by the standard deviation of each respective security.
• C) The expected return on the portfolio is equal to the portfolio beta times the weighted average of the expected returns of each of the individual securities in the portfolio.
• D) The standard deviation of the portfolio is equal to the square root of the summation of the individual security variances.
• E) The expected return of the portfolio is equal to the risk free rate of return plus a risk premium based on a weighted average of the betas of the individual securities and the market risk premium.

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Definitions:

Contract Formation

The process by which parties reach an agreement on the terms of a contract, creating legal obligations.

Master Of The Offer

Refers to the party in a contractual agreement who has the authority and capacity to make the offer to another party.

Terms And Conditions

The set of rules and guidelines that are agreed upon between parties, typically outlining the rights, duties, and limits pertaining to a service or transaction.

Unilateral Contract

An agreement in which one party makes a promise in exchange for an act by another party, without a reciprocal promise being made.