Stocks a and B Each Have an Expected Return of 12%,a

question 147

Multiple Choice

Stocks A and B each have an expected return of 12%,a beta of 1.2,and a standard deviation of 25%.The returns on the two stocks have a correlation of +0.6.Portfolio P has 50% in Stock A and 50% in Stock B.Which of the following statements is CORRECT?

• A) Portfolio P has a beta that is greater than 1.2.
• B) Portfolio P has a standard deviation that is greater than 25%.
• C) Portfolio P has an expected return that is less than 12%.
• D) Portfolio P has a standard deviation that is less than 25%.
• E) Portfolio P has a beta that is less than 1.2.

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Definitions:

Homeostasis

The ability of a living organism to maintain stable internal conditions despite changes in the external environment.

Circulatory System

The body's system responsible for the transport of blood, nutrients, gases, and wastes throughout the body, involving the heart and blood vessels.

Surface-Area-To-Volume Ratio

Ratio of a cell’s outside area to its internal volume; the relationship limits the maximum size of a cell.

Keratin

A type of protein found in the skin, hair, and nails, responsible for their strength, protection, and waterproofing properties.