You Have a Portfolio P That Consists of 50% Stock

question 95

Multiple Choice

You have a portfolio P that consists of 50% Stock X and 50% Stock Y.Stock X has a beta of 0.7 and Stock Y has a beta of 1.3.The standard deviation of each stock's returns is 20%.The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero.Given this information, which of the following statements is CORRECT?

• A) The required return on Portfolio P is equal to the market risk premium (r_M − r_RF).
• B) Portfolio P has a beta of 0.7.
• C) Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate, r_RF.
• D) Portfolio P has the same required return as the market (r_M).
• E) Portfolio P has a standard deviation of 20%.

---

Definitions:

Data Member

An attribute or field within a class in object-oriented programming that stores data specific to each object instance created from the class.

Void

A keyword used in programming languages to indicate that a method does not return any value.

BaseRadius

Typically refers to a property or variable used to denote the radius of a base in geometric shapes or structures.

Height

Height refers to the measurement of an object or individual from base to top or from the ground to its highest point.