The Expected Returns for Bumpy Inc

question 75

Multiple Choice

The expected returns for Bumpy Inc.and Bouncy Inc.are 20.0% and 8.0%, respectively.The standard deviation is 35.0% for Bumpy and 16.0% for Bouncy.What is the portfolio standard deviation if 45.0% of the portfolio is in Bumpy and the two securities have perfect negative correlation?

• A)4.60%
• B)6.95%
• C)0.21%
• D)0.48%

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Definitions:

End-Of-Period Accrual

Accounting adjustments made at the end of accounting periods to record revenues earned and expenses incurred but not yet recorded.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to the reversal of revenue and reduction in sales figures.

Gross Accounts Receivable

The total amount owed to a company by its customers before deducting any allowance for doubtful accounts.

Accrual Accounting

A financial recording approach in which earnings and expenditures are documented upon being accrued, without considering the timing of the associated cash movements.