You Own a Portfolio Comprised of 4 Stocks and the Economy

question 57

Multiple Choice

You own a portfolio comprised of 4 stocks and the economy has 3 possible states.Assume you invest your portfolio in a manner that results in an expected rate of return of 7.5 percent,regardless of the economic state.Given this,what must be value of the portfolio's variance be?

• A) negative, but not -1
• B) -1.0
• C) 0.0
• D) 1.0
• E) positive, but not +1

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Definitions:

Primacy Effect

A cognitive bias that results in a person remembering information from the beginning of a list better than information presented later.

Phi Phenomenon

The visual trick of seeing ongoing movement in distinct items observed quickly one after the other.

Recency Effect

The tendency to remember the most recently presented information best, which can affect how memories are retrieved.

Chunking Effect

A memory strategy that involves grouping information into manageable units or "chunks" to enhance the ability to remember it.