The Market Consists of Two Stocks

question 15

Multiple Choice

The market consists of two stocks. Stock F has an expected return of 9 percent and a standard deviation of 32 percent. Stock G has an expected return of 13 percent and a standard deviation of 50 percent. The correlation between the two stocks is -0.10. The efficient frontier is:

• A) the line between Stock F and Stock G.
• B) the line between the minimum variance portfolio and Stock F.
• C) the line between the minimum variance portfolio and Stock G.
• D) all to the right of Stock F on the risk/return graph.
• E) all to the right of Stock G on the risk/return graph.

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Definitions:

Actionable Subsidy

A financial contribution provided by a government that is subject to legal action or dispute due to its trade-distorting effects.

Indirect Subsidy

Financial support or assistance given indirectly through actions such as tax breaks or other benefits that reduce the cost or increase the revenue of certain entities.

Basic Types

Denotes fundamental categories or classifications within a broader concept, subject, or field.

North American Free Trade Agreement

An agreement among the United States, Canada, and Mexico designed to remove tariff barriers between the three countries.