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

question 81

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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: 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<sub>xCML</sub>] = r<sub>f</sub> + x(E[R<sub>Mkt</sub>] + r<sub>f</sub>)  B) r<sub>i</sub> = r<sub>f</sub> + b(E[R<sub>Mkt</sub>] - r<sub>f</sub>)  C) SD(R<sub>xCML</sub>) = xSD(R<sub>Mkt</sub>)  D) E[R<sub>xCML</sub>] = (1 - x) r<sub>f</sub> + xE[R<sub>Mkt</sub>] The risk free rate is 3.5%.
-Which of the following equations is INCORRECT?

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Definitions:

External Validity

The degree to which a study's findings can be applied to different situations and various individuals.

Extraneous Variables

Variables that can influence the outcome of an experiment but are not the variables being studied.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases, and vice versa.

Qualitative Research

A research methodology that seeks to understand phenomena through the collection and analysis of non-numerical data, such as interviews and observations.

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