Stock a Has an Expected Return of 15%,and Stock B

question 64

Multiple Choice

Stock A has an expected return of 15%,and stock B has an expected return of 6%.However,the risk of stock A as measured by its variance is 3 times that of stock B.If the two stocks are combined equally in a portfolio,what would be the portfolio's expected return?

• A)4.25%
• B)10.5%
• C)20%
• D)Greater than 20%
• E)Need more information to answer.

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Definitions:

Dynamic Capabilities

The ability to adapt and renew competencies in accordance with changing business environment.

Renew Competencies

Refers to the process of updating and refreshing the skills, knowledge, and capabilities that are essential for individuals or organizations to remain competitive and proficient in their fields.

Business Environment

The combination of all external and internal factors that influence the operations, opportunities, and threats to an organization.

Discarded Strategy

A strategic plan or action that has been abandoned or no longer pursued by an organization.