You Have a Portfolio Which Is Comprised of 40% of Stock

question 52

Multiple Choice

You have a portfolio which is comprised of 40% of Stock A and 60% of Stock B. What is the standard deviation of this portfolio?
$\begin{array}{lccc}\text { State of the Economy } & \text { Probability } & \text { A } & \text { B } \\\text { Boom } & .15 & 22 \% & 19\% \\\text { Normal } & .80 & 12\% & 10\% \\\text { Recession } & .05 & -26 \% & -4\%\end{array}$

• A)4.39%
• B)5.68%
• C)6.41%
• D)7.14%
• E)9.08%

Grasp factors affecting a firm’s sensitivity to the business cycle, including financial and operating leverage, and product type.

Recognize how various economic conditions influence investment decisions in different industries.

Understand the effects of macroeconomic shocks, such as oil price changes, on the economy.

Know the roles and appointment process of the Federal Reserve System’s Board of Governors.

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Definitions:

Liquidation

The process of winding up a company's operations, selling its assets, and distributing the proceeds to creditors and shareholders.

Stockholders' Equity

Refers to the ownership interest of shareholders in a corporation, calculated as the company's total assets minus its total liabilities.

Treasury Stock

Stocks that have been distributed and then bought back by the issuing corporation, thus decreasing the volume of available shares in the market.

Total Stockholders' Equity

The total value of a company's assets minus its liabilities, representing the ownership interest of the stockholders.