You Have Divided Your Money Equally Between Two Stocks

question 52

Multiple Choice

You have divided your money equally between two stocks. Both have expected returns of 12%, standard deviations of 18%, and betas of 1.1. Assume the returns of the two stocks are
Not perfectly positively correlated. Which of the following statements is (are) necessarily true?

• A)The beta of your portfolio is less than 1.1.
• B)The expected return on your portfolio is 12%.
• C)The standard deviation of the portfolio returns is 18%.
• D)Both A and B are true statements.

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Definitions:

Freight-In

Freight-in concerns the shipping costs of receiving goods to be sold or used in production, added to the cost of purchased inventory.

Sales Returns and Allowances

Concessions made by the seller, including refunds and reductions in the original selling price for returned goods or deficiencies.

Operating Expenses

Expenses incurred from a company's primary business activities, excluding cost of goods sold, such as rent, salaries, and utility bills.

Gross Profit

The difference between revenue and the cost of goods sold, before deducting overhead, payroll, taxation, and interest.