Exhibit 714
Use the Information Below for the Following Problem(S)
Stocks

question 26

Multiple Choice

Exhibit 7.14
Use the Information Below for the Following Problem(S)
Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.
$$\begin{array} { c c c } \text { Stack } & \text { Expected Return } & \text { Standard Devintion } \\\hline \text { A } & 20 \% & 25 \% \\B & 15 \% & 19 \%\end{array}$$
-Refer to Exhibit 7.14.What is the expected return of the stock A and B portfolio?

• A) 17.0%
• B) 17.5%
• C) 18.0%
• D) 18.5%
• E) 19.0%

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