Stocks a and B Each Have an Expected Return of 15%,a

question 95

Multiple Choice

Stocks A and B each have an expected return of 15%,a standard deviation of 20%,and a beta of 1.2.The returns on the two stocks have a correlation coefficient of +0.6.You have a portfolio that consists of 50% A and 50% B.Which of the following statements is CORRECT?

• A) The portfolio's beta is less than 1.2.
• B) The portfolio's expected return is 15%.
• C) The portfolio's standard deviation is greater than 20%.
• D) The portfolio's beta is greater than 1.2.
• E) The portfolio's standard deviation is 20%.

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Definitions:

Short-Run Equilibrium

A state in economics where demand equals supply, resulting in market stability over a temporary period.

Long-Run Aggregate-Supply Curve

Illustrates the total production of goods and services in an economy at different price levels when input prices fully adjust to changes in the price level.

Expansion

The increase in the scale of production or operation by a company, often involving larger facilities, workforce, and entering new markets.

Aggregate Demand

The all-inclusive demand for products and services within an economic framework, priced at a specific level throughout a determined timeframe.