Florida Company (FC) and Minnesota Company (MC) Are Both Service

question 28

Multiple Choice

Florida Company (FC) and Minnesota Company (MC) are both service companies. Their historical return for the past three years are: FC: - 5%, 15%, 20%; MC: 8%, 8%, 20%. What is the standard deviation of the portfolio with 50% of the funds invested in FC and 50% in MC?

• A) 10.6%
• B) 14.4%
• C) 9.3%
• D) None of the above

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Definitions:

Test Statistic

A value calculated from sample data that is used in a hypothesis test to make a decision about the null hypothesis.

Sample Data

Data collected from a subset of a population, used to make inferences or predictions about the larger group.

Population Variance

A measure of the dispersion or spread of a set of data points in a population, calculated by taking the average of the squared differences from the mean.

Critical Value

A threshold or boundary in hypothesis testing that defines the cutoff between the rejection or non-rejection of the null hypothesis.