A Portfolio Consists of Stock C with an Expected Return

question 5

Multiple Choice

A portfolio consists of Stock C with an expected return of 10 percent and a standard deviation of 45 percent and Stock D with an expected return of 13 percent and a standard deviation of 56 percent. The portfolio is equally-weighted between the two stocks, and the correlation between the two stocks is zero. What is the smallest expected loss of the portfolio over the next month with a probability of 5 percent?

• A) -19.62%
• B) -14.32%
• C) -8.43%
• D) -16.10%
• E) -11.37%

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Definitions:

Bank Statement

A summarized documentation provided by a bank listing all transactions that have occurred in a given account within a specific period, including deposits, withdrawals, and balances.

Accounting Records

Documentation and books that systematically record all financial transactions of an entity, providing a basis for financial reporting.

Bank Errors

Mistakes made by a bank in the accounting records or transactions related to a customer's account.

Bank Reconciliation

Bank reconciliation is a process that matches the balance on a company’s books to the corresponding amount on its bank statement, confirming that figures are correct and in agreement.