Bob Has a $50,000 Stock Portfolio with a Beta of 1.2,an

question 81

Multiple Choice

Bob has a $50,000 stock portfolio with a beta of 1.2,an expected return of 10.8%,and a standard deviation of 25%.Becky also has a $50,000 portfolio,but it has a beta of 0.8,an expected return of 9.2%,and a standard deviation that is also 25%.The correlation coefficient,r,between Bob's and Becky's portfolios is zero.If Bob and Becky marry and combine their portfolios,which statement about their combined $100,000 portfolio is true?

• A)The combined portfolio's expected return will be less than the simple weighted average of the expected returns of the two individual portfolios, 10.0%.
• B)The combined portfolio's beta will be equal to a simple average of the betas of the two individual portfolios, 1.0; its expected return will be equal to a simple weighted average of the expected returns of the two individual portfolios, 10.0%; and its standard deviation will be less than the simple average of the two portfolios' standard deviations, 25%.
• C)The combined portfolio's expected return will be greater than the simple weighted average of the expected returns of the two individual portfolios, 10.0%.
• D)The combined portfolio's standard deviation will be greater than the simple average of the two portfolios' standard deviations, 25%.

---

Definitions:

Benchmark Jobs

Positions within an organization used as a standard or comparison point for determining the value of other jobs and setting salary levels.

Market Comparisons

The process of comparing an organization's compensation levels, benefits, and job functions to similar positions in other companies within the same industry to establish competitive salaries.

Broad Banding

A method of salary structure that consolidates a large number of pay grades into fewer, wider ranges to offer greater flexibility in managing employee career progression.

Pay Grade

A step or level within a compensation system that determines the amount of pay an employee receives, based on their job or position.