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

question 54

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

• A)13.5%.
• B)15.2%.
• C)17.1%.
• D)19.0%.

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Definitions:

Organic Material

Matter derived from living organisms, typically consisting of carbon-based compounds.

Breccia Pipe

A pipe- or cone-shaped structure filled with breccia; mostly formed by cave collapse, but can also form by igneous and hydrothermal processes.

Uranium Ore

A natural mineral from which uranium can be economically extracted for use in energy production and nuclear weapons.

Caldera

A large, basin-shaped volcanic depression more extensive than a crater, formed by the collapse of land following a volcanic eruption.