Assume That Your Uncle Holds Just One Stock, East Coast

question 30

Multiple Choice

Assume that your uncle holds just one stock, East Coast Bank (ECB) , which he thinks has very little risk. You agree that the stock is relatively safe, but you want to demonstrate that his risk would be even lower if he were more diversified. You obtain the following returns data for West Coast Bank (WCB) . Both banks have had less variability than most other stocks over the past 5 years. Measured by the standard deviation of returns, by how much would your uncle's risk have been reduced if he had held a portfolio consisting of 60% in ECB and the remainder in WCB? (Hint: Use the sample standard deviation formula.) $$\begin{array} { l c r } \text { Year } & \text { ECB } & \text { WCB } \\2009& 40.00 \% & 40.00 \% \\2010 & - 10.00 & 15.00 \% \\2011 & 35.00 \% & - 5.00 \% \\2012 & - 5.00 \% & - 10.00 \% \\2013 & 15.00 \% & 35.00 \% \\\\\text { Average return = } & 15.00 \% & 15.00 \% \\\text { Standard deviation = } & 22.64 \% & 22.64 \%\end{array}$$

• A) 3.29%
• B) 3.46%
• C) 3.65%
• D) 3.84%
• E) 4.03%

Grasp the implications of key legal and constitutional decisions made during and after World War II.

Analyze the transformation in public opinion and social norms as a result of World War II.

Understand the concept and calculation of sample correlation coefficient.

Calculate and interpret SSE, SST, and MSE in regression analysis.

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Definitions:

Scientific Management

An approach to management that analyzes and synthesizes workflows, aiming to improve economic efficiency, especially labor productivity, through scientific methods.

Mass Manufacturing

The production of large quantities of standardized products, often utilizing assembly lines and automation to achieve efficiency and economies of scale.

Shift Workers

Employees who work schedules outside the traditional 9-5 working hours, often including evenings, nights, or rotating shifts.

Competitive Advantage

The unique attributes or circumstances that allow an organization or country to produce goods or services at a lower price or in a more desirable fashion than competitors.