An Investment fiRm Is Considering a Portfolio with Equal Weighting

question 51

Multiple Choice

An investment firm is considering a portfolio with equal weighting in a cyclical stock and a countercyclical stock. It is expected that there will be three economic states; Good, Average and
Bad, each with equal probabilities of occurrence. The cyclical stock is expected to have returns of
12%, 5% and 1% in Good, Average and Bad economies respectively. The countercyclical stock is
Expected to have returns of -8%, 2% and 14% in Good, Average and Bad economies respectively.
Given this information, calculate portfolio expected return.

• A) 2.32%
• B) 3.32%
• C) 4.32%
• D) 5.32%
• E) 6.32%

Learn the specific terminology and abbreviations related to technical drawing and dimensioning.

Differentiate between types of lines used in technical drawings and their purposes.

Recognize the importance of lettering size, legibility, and consistency on technical drawings.

Understand the basics of projection and how objects are represented from different perspectives.

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Definitions:

Interest Rate Parity

A theory suggesting that the difference in interest rates between two countries will be equal to the differential between the forward exchange rate and the spot exchange rate.

British Security

A financial instrument issued in the UK that represents either equity in a company, debt obligations, or other rights to ownership or profit.

Forward Rate

An agreed-upon price for a financial transaction that will occur at a future date.

International Fisher Effect

A theory stating that the difference in nominal interest rates between two countries is equal to the expected change in their exchange rates.