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:

Mortgage

An agreement in which a bank or lender provides funds to a borrower at a certain interest rate, securing the loan by temporarily taking ownership of the borrower's property. This ownership is transferred back to the borrower once the loan is fully repaid.

Drawee

The party, typically a bank, on whom a check or draft is drawn and is responsible for paying the amount specified.

Checking Account

A bank account that allows for the deposit and withdrawal of funds, typically using checks, debit cards, and electronic transfers, intended for daily transactions.

Cashier's Check

A check issued by a bank or financial institution, guaranteed by the bank itself, used for making large payments where the payee requires assurance of payment.