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

question 54

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%.
-The volatility on the market portfolio (which is a 50-50 combination of the value and growth portfolios) is closest to:

• A)13.5%.
• B)15.2%.
• C)17.1%.
• D)19.0%.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to each unit of production, based on estimated or budgeted overhead costs and activity.

Machine-Hours

A measure of production output or activity level based on the total hours machines are operating.

Total Manufacturing Cost

The cumulative expense of producing goods, including labor, materials, and overhead costs.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated before the production period begins.