Two Stocks in Your Portfolio, X and Y, Have Independent

question 101

Multiple Choice

two stocks in your portfolio, X and Y, have independent returns, so the correlation between them, rXY is zero Your portfolio consists of $50,000 invested in Stock X and $50,000 invested in Stock Y Both stocks have an expected return of 15%, betas of 1.6, and standard deviations of 30%Which of the following statements best describes the characteristics of your 2-stock portfolio?

• A) Your portfolio has a standard deviation less than 30%, and its beta is greater than 1.6.
• B) Your portfolio has a beta equal to 1.6, and its expected return is 15%.
• C) Your portfolio has a beta greater than 1.6, and its expected return is greater than 15%.
• D) Your portfolio has a standard deviation greater than 30% and a beta equal to 1.6.
• E) Your portfolio has a standard deviation of 30%, and its expected return is 15%.

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Definitions:

ATC

Average Total Cost, which is the sum of all production costs divided by the quantity of output produced.

Short Run

A period in which at least one input is fixed and firms cannot adjust all inputs to production.

ATC

Average Total Cost; the total cost of production divided by the quantity of output produced.

Price Charged

The amount of money required for the purchase of a good or service, set by the seller.