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

question 87

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 expected return on the market portfolio (which is a 50-50 combination of the value and growth portfolios) is closest to:

• A)12.0%.
• B)13.5%.
• C)15.0%.
• D)19.0%.

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Definitions:

Legitimate Power

Authority that is recognized and accepted by others within an organization due to a formal position or role.

Formal Authority

The power granted to an individual or organization by virtue of position or status, enabling them to enforce rules and make decisions.

Prerogatives

Special rights or privileges exclusively reserved for a particular person, group, or class.

Rational Persuasion

A method of influencing others through logical arguments and factual evidence to change beliefs, attitudes, or behaviors.