Stock Q Is Expected to Return 14 Percent in a Boom

question 39

Multiple Choice

Stock Q is expected to return 14 percent in a boom and 8 percent in a normal economy.Assume Stock R will return 11 percent in a boom and 10 percent in a normal economy.The probability of a boom is 13 percent.Otherwise,the economy will be normal.What is the standard deviation of a portfolio that is invested 48 percent in stock Q and 52 percent in stock R?

• A)0.78%
• B)1.42%
• C)1.14%
• D)0.67%
• E)1.61%

---

Definitions:

Commodities Market

A marketplace where traders buy and sell raw physical products such as gold, oil, or agricultural products.

Ownership

The legal right or status of having control over property, resources, or assets.

Wheat

A cereal grain that is a staple food used to make flour for bread, pasta, pastry, and other food products.

Employees

Individuals who are hired by a business or organization to perform specific duties in exchange for compensation such as wages, salary, or other benefits.