A Portfolio Is Composed of Two Stocks, a and B

question 21

Multiple Choice

A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 24%, while stock B has a standard deviation of return of 18%. Stock A comprises 60% of the portfolio, while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is .0380, the correlation coefficient between the returns on A and B is ________.

• A) .583
• B) .225
• C) .327
• D) .128

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Definitions:

Cataracts

A clouding of the lens in the eye, leading to a decrease in vision.

Glaucoma

A group of eye conditions that damage the optic nerve, crucial for vision, often due to abnormally high pressure in the eye.

Phacoemulsification

A modern cataract surgery technique that uses ultrasonic energy to emulsify the lens of the eye for removal and replacement with an intraocular lens.

Phacolysis

A surgical procedure for cataract removal where the lens of the eye is emulsified and aspirated.