Stocks a and B Both Have an Expected Return of 10

question 91

Multiple Choice

Stocks A and B both have an expected return of 10% and a standard deviation of returns of 25%.Stock A has a beta of 0.8 and Stock B has a beta of 1.2.The correlation coefficient,r,between the two stocks is 0.6.Portfolio P is a portfolio with 50% invested in Stock A and 50% invested in B.Which of the following statements is correct?

• A)Portfolio P has a standard deviation of 25% and a beta of 1.0.
• B)Based on the information we are given, and assuming those are the views of the marginal investor, it is apparent that the two stocks are in equilibrium.
• C)Portfolio P has more market risk than Stock A but less market risk than Stock B.
• D)Stock A should have a higher expected return than Stock B as viewed by the marginal investor.

---

Definitions:

Oedipus Complex

A Freudian concept in psychoanalytic theory involving a child's subconscious sexual desire for the opposite-sex parent and jealousy toward the same-sex parent.

Dual Parenting

A family structure involving two parents engaging cooperatively in the upbringing and care of their children.

Queer Theorists

Scholars who study issues relating to sexuality and gender identity, often challenging conventional understandings and norms.

LGBTQ Perspectives

The experiences, views, and issues pertinent to individuals who identify as lesbian, gay, bisexual, transgender, or queer.