Portfolio AB Was Created by Investing in a Combination of Stocks

question 54

Multiple Choice

Portfolio AB was created by investing in a combination of Stocks A and B.Stock A has a beta of 1.2 and a standard deviation of 25%.Stock B has a beta of 1.4 and a standard deviation of 20%.Portfolio AB has a beta of 1.25 and a standard deviation of 18%.Which of the following statements is CORRECT?

• A) Stock A has more market risk than Stock B but less stand-alone risk.
• B) Portfolio AB has more money invested in Stock A than in Stock B.
• C) Portfolio AB has the same amount of money invested in each of the two stocks.
• D) Portfolio AB has more money invested in Stock B than in Stock A.
• E) Stock A has more market risk than Portfolio AB.

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Definitions:

Rh Incompatibility

A condition that arises during pregnancy if an Rh-negative mother's immune system reacts against Rh-positive baby blood cells.

Antibodies

Proteins produced by the immune system that recognize, bind to, and help neutralize foreign substances such as bacteria and viruses.

Thalidomide

A medication once used during pregnancy that led to severe birth defects, now used under strict controls for some diseases, including multiple myeloma and certain skin conditions.

Birth Defects

Abnormalities of structure, function, or body metabolism present at birth that can lead to physical or mental disability, or sometimes death.