Stock a Has an Expected Return of 16 Percent,and Stock

question 4

Multiple Choice

Stock A has an expected return of 16 percent,and stock B has an expected return of 8 percent.However,the risk of stock A as measured by its variance is 3.2 times that of stock B.If the two stocks are combined equally in a portfolio,what would be the portfolio's expected return?

• A)11.50%
• B)9.50%
• C)12.00%
• D)8.25%
• E)14.10%

---

Definitions:

Imaginary Audience

The belief, particularly prevalent in adolescence, that one is constantly being watched and judged by others, leading to self-consciousness and a focus on appearance to peers.

Personal Fable

A cognitive distortion often seen in adolescence, where the individual believes their thoughts, feelings, and experiences are unique and not understood by others.

Formal Operations

The fourth and final stage of Jean Piaget's theory of cognitive development, marked by the ability to think abstractly, logically, and systematically.

Piaget's Stage

Refers to one of the four stages in Jean Piaget's theory of cognitive development through which children progress from infancy to adolescence, acquiring new understandings and cognitive skills.