Consider the Following Information on Three Stocks: a Portfolio

question 94

Multiple Choice

Consider the following information on three stocks: A portfolio is invested 35 percent each in Stock A and Stock B and 30 percent in Stock C.What is the expected risk premium on the portfolio if the expected T-bill rate is 3.3 percent?

• A)11.47 percent
• B)12.38 percent
• C)16.67 percent
• D)24.29 percent
• E) 25.82 percent

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Definitions:

Materials Price Variance

The difference between the actual amount paid for materials and the expected (or standard) cost of those materials, multiplied by the quantity of materials purchased.

Direct Material Standards

Standard costs set for the quantity and price of materials required for a manufacturing process.

Purchases Variance

A measurement of the difference between the actual cost of materials and the expected, or standard, cost.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the standard costs for the actual production volume.