Consider the Following Information for Three Stocks,A,B,and C

question 69

Multiple Choice

Consider the following information for three stocks,A,B,and C.The stocks' returns are positively but not perfectly positively correlated with one another,i.e.,the correlations are all between 0 and 1. ​
Portfolio AB has half of its funds invested in Stock A and half in Stock B.Portfolio ABC has one third of its funds invested in each of the three stocks.The risk-free rate is 5%,and the market is in equilibrium,so required returns equal expected returns.Which of the following statements is CORRECT?

• A)Portfolio AB has a standard deviation of 20%.
• B)Portfolio AB's coefficient of variation is greater than 2.0.
• C)Portfolio AB's required return is greater than the required return on Stock A.
• D)Portfolio ABC's expected return is 10.66667%.
• E)Portfolio ABC has a standard deviation of 20%.

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Definitions:

Production Order Quantity Model

An economic order quantity technique applied to production orders.

Production Departments

Divisions within a manufacturing or production company responsible for the actual production of goods or services.

Demand Rate

refers to the speed at which customers purchase or demand a product or service over a given period of time.

Production Order Quantity Model

An inventory management technique that determines the optimal quantity of products to order or produce, minimizing total inventory costs.