Stock a Has an Expected Return of 12%, a Beta

question 100

Multiple Choice

Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%.Stock B also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%.Portfolio AB has $300,000 invested in Stock A and $100,000 invested in Stock B.The correlation between the two stocks' returns is zero (that is, r_A,B = 0) .Which of the following statements is CORRECT?

• A) The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is overvalued.
• B) The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is undervalued.
• C) Portfolio AB's expected return is 11.0%.
• D) Portfolio AB's beta is less than 1.2.
• E) Portfolio AB's standard deviation is 17.5%.

Develop strategies for making a message more concise, including the elimination of unnecessary words and phrases.

Identify and eliminate redundancies in writing to improve message clarity.

Understand the importance of grammar, spelling, and clarity in all forms of media, including digital.

Describe techniques for clarifying sentence structure to improve readability.

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Definitions:

Minimum Wage

The lowest hourly, daily, or monthly remuneration that employers are legally allowed to pay to workers.

Income-Maintenance Programs

Governmental schemes designed to ensure individuals have a minimum income level through benefits or transfers, often to support those unemployed or in poverty.

Elasticity Of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, showcasing consumer sensitivity to price changes.

Political Lobbying

The act of attempting to influence decisions made by officials in the government, most often legislators or members of regulatory agencies.