Stocks a and B Both Have an Expected Return of 10

question 23

Multiple Choice

Stocks A and B both have an expected return of 10% and a standard deviation of returns of 25%.Stock A has a beta of 0.8 and Stock B has a beta of 1.2.The correlation coefficient, r, between the two stocks is 0.6.Portfolio P has 50% invested in Stock A and 50% invested in B.Which of the following statements is CORRECT?

• A) Based on the information we are given, and assuming those are the views of the marginal investor, it is apparent that the two stocks are in equilibrium.
• B) Portfolio P has more market risk than Stock A but less market risk than B.
• C) Stock A should have a higher expected return than Stock B as viewed by the marginal investor.
• D) Portfolio P has a coefficient of variation equal to 2.5.
• E) Portfolio P has a standard deviation of 25% and a beta of 1.0.

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Definitions:

Violent Media

Content in various forms of media, such as television, movies, video games, and the internet, that depicts acts of physical force intended to hurt or kill.

Identifying

The process of associating oneself closely with certain qualities, characteristics, or groups.

Filmed Violence

Acts of aggression and violence depicted in movies or television that can influence viewers' attitudes and behaviors.

Aggress

Refers to the act of initiating hostilities or conflict, typically to assert dominance or respond to perceived threats.