Exhibit 712
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 19

Multiple Choice

Exhibit 7.12
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Asset 1 } & \text { Asset 2 } \\\hline E \left( R _ { 1 } \right) = .12 & E \left( R _ { 2 } \right) = .16 \\E \left( \sigma _ { 1 } \right) = .04 & E \left( \sigma _ { 2 } \right) = .06\end{array}$$
-Refer to Exhibit 7.12. Calculate the expected return and expected standard deviation of a two stock portfolio when r_1,2 = -.60 and w₁ = .75.

• A).13 and .0024
• B).13 and .0455
• C).12 and .0585
• D).12 and .5585
• E).13 and .6758

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Definitions:

Residual Dividend Policy

A strategy where dividends are paid out from the residual or leftover equity after all necessary operating expenses and working capital needs are met.

Investment Needs

The financial goals or objectives that require the allocation of capital in securities or assets.

Dividends

Regular payments made by a corporation to its shareholders out of its profits or reserves.

Regular Cash Dividend

A payment made to shareholders from a company's earnings on a routine basis.