You Own a Portfolio of 5 Stocks and Have 3

question 67

Multiple Choice

You own a portfolio of 5 stocks and have 3 expected states of the economy.You have twice as much invested in Stock A as you do in Stock E.How will the weights be determined when you compute the rate of return for each economic state?

• A) The weights will be the probability of occurrence for each economic state.
• B) Each stock will have a weight of 20 percent for a total of 100 percent.
• C) The weights will decline steadily from Stock A to Stock E.
• D) The weights will be based on the amount invested in each stock as a percentage of the total amount invested.
• E) The weights will be based on a combination of the dollar amounts invested as well as the economic probabilities.

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Definitions:

Income Elasticity

An indicator that shows the variation in demand for a product based on changes in the income levels of consumers.

Pro Football Games

Professional American football matches played by teams that are members of the National Football League (NFL) or other professional football leagues.

Normal Goods

Goods for which demand increases as the income of consumers increases and vice versa, showing a direct relationship between income and demand.

Demand Schedule

A list or table showing how much of a good or service consumers will want to buy at different prices.