Stock X Has a Beta of 0

question 78

Multiple Choice

Stock X has a beta of 0.7 and Stock Y has a beta of 1.3.The standard deviation of each stock's returns is 20%.The stocks' returns are independent of each other,i.e. ,the correlation coefficient,r,between them is zero.Portfolio P consists of 50% X and 50% Y.Given this information,which of the following statements is CORRECT?

• A) Portfolio P has a standard deviation of 20%.
• B) The required return on Portfolio P is equal to the market risk premium (r_M - r_RF).
• C) Portfolio P has a beta of 0.7.
• D) Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate,r_RF.
• E) Portfolio P has the same required return as the market (r_M).

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Definitions:

Self-efficacy

An individual's belief in their capacity to execute behaviors necessary to produce specific performance attainments.

Insight

The ability to understand the inner nature of things or to gain a clear or deep perception of a complicated problem or situation.

Self-awareness

The conscious recognition and understanding of one's own character, feelings, motives, and desires.

Cultural Sensitivity

The awareness, understanding, and respect for other cultures, and the ability to behave appropriately when interacting with people from those cultures.