Stocks a and B Each Have an Expected Return of 15

question 103

Multiple Choice

Stocks A and B each have an expected return of 15%, a standard deviation of 20%, and a beta of 1.2.The returns on the two stocks have a correlation coefficient of +0.6.Your portfolio consists of 50% A and 50% B.Which of the following statements is CORRECT?

• A) The portfolio's expected return is 15%.
• B) The portfolio's standard deviation is greater than 20%.
• C) The portfolio's beta is greater than 1.2.
• D) The portfolio's standard deviation is 20%.
• E) The portfolio's beta is less than 1.2.

---

Definitions:

Tenants in Common

A form of co-ownership where each owner holds a separate and distinct share of the property, which can be sold or passed on to heirs.

Acquires Ownership

The process by which a person or entity obtains the legal right or title to an asset or property.

Valet

An employee who parks cars for guests at hotels, restaurants, or other venues, or a personal servant attending to an individual's personal needs.

Covered Parking Garage

A parking facility that has a roof or is otherwise enclosed to protect vehicles from the elements.