Use the Table for the Question(s) Below

question 97

Multiple Choice

Use the table for the question(s) below.
Consider the following expected returns, volatilities, and correlations:

-The volatility of a portfolio that is consists of a long position of $10000 in Wal-Mart and a short position of $2000 in Microsoft is closest to:

• A) 9%
• B) 14%
• C) 11%
• D) 12%

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Definitions:

Employee Stock Option

A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

Fixed Price

A pricing strategy where the cost of goods or services is set at a specific amount and does not fluctuate.

Buy Shares

The act of purchasing ownership interests in a company, thereby becoming a shareholder entitled to dividends and capital gains.

Lower Bound

The minimum value that a theoretical price, such as an option's price, can reach.