Stocks a and B Each Have an Expected Return of 15%,a

question 1

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.You have a portfolio that consists of 50% A and 50% B.Which of the following statements is correct?

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

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Definitions:

Demand Curves

Graphical representations showing the relationship between the price of a good and the quantity demanded by consumers.

Perfect Competition

Perfect Competition is a market structure characterized by a large number of small firms, identical products sold by all firms, no barriers to enter or exit the market, and perfect knowledge of prices and technology.

Perfect Competitor

Describes a market scenario where numerous small firms compete against each other, and no single firm can influence the market price of goods and services.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded.