Assume That Stock Market Returns Do Not Resemble a Single-Index

question 6

Multiple Choice

Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments. They will need to calculate _____________ expected returns and ___________ variances of returns.

• A) 100; 100
• B) 100; 4950
• C) 4950; 100
• D) 4950; 4950

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Definitions:

Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets, representing the premium paid for the company's reputation, customer base, or brand identity.

Separate Incorporation

A legal entity distinct from its shareholders or owners, recognized as such by law and capable of rights, privileges, and liabilities.

Parent Company

A company that holds sufficient shares in another business to dictate its management and operations through the power to influence or choose its board of directors.