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A Stock Fund Has a Standard Deviation of 16% and a Bond

question 44

Multiple Choice

A stock fund has a standard deviation of 16% and a bond fund has a standard deviation of 4%. The correlation of the two funds is .11. What is the weight of the stock fund in the minimum variance portfolio?


Definitions:

Clientele Effect

A theory suggesting that changes in dividend policy may attract different groups of investors based on their preferences for dividend payouts versus capital gains.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price, typically expressed as a percentage.

Price/earnings Ratio

A valuation metric for companies, calculated as the market value per share divided by the earnings per share.

Excess Cash

Refers to the amount of cash held by a company that exceeds the normal operational needs, often indicating a potential for investment, distribution to shareholders, or acquisition.

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