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Assume That the Market Is in Equilibrium and That Portfolio

question 87

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Assume that the market is in equilibrium and that Portfolio AB has 50% invested in Stock A and 50% invested in Stock BStock A has an expected return of 10% and a standard deviation of 20% Stock B has an expected return of 13% and a standard deviation of 30% The risk-free rate is 5% and the market risk premium, rM − rRF, is 6% The returns of Stock A and Stock B are independent of one another, i.e., the correlation coefficient between them is zero Which of the following statements is CORRECT?


Definitions:

Management Philosophy

A set of beliefs or principles that guide how an organization is managed and how decisions are made.

Organizational Myths

Widely held but false beliefs within an organization that influence its culture and decisions.

Social System

An organized collection of roles and norms that regulate the behavior and expectations of individuals within a group.

Rituals

Are formal, often repeated behaviors and practices that carry symbolic meaning within a culture or organization.

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