Use the Following Information to Answer the Question(s)below

question 81

Multiple Choice

Use the following information to answer the question(s) below.
Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio) : growth stocks and value stocks.Assume that these two portfolios are equal in size (market value) ,the correlation of their returns is equal to 0.6,and the portfolios have the following characteristics: The risk free rate is 3.5%.
-Which of the following equations is INCORRECT?

• A)E[R_xCML] = r_f + x(E[R_Mkt] + r_f)
• B)r_i = r_f + b(E[R_Mkt] - r_f)
• C)SD(R_xCML)= xSD(R_Mkt)
• D)E[R_xCML] = (1 - x)r_f + xE[R_Mkt]

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Definitions:

Journaling Method

A technique for personal reflection and record-keeping that involves regular writing of experiences, thoughts, and feelings.

Reflection Journal

A personal record in which individuals write down their experiences and reflect upon them to gain insights.

Learning Dimension

Aspects or areas of the learning process, such as cognitive, emotional, and social dimensions that affect how learning occurs.

Civic

Pertaining to citizenship or the responsibilities, rights, and duties of citizens within a community or society.