Use the Table for the Question(s)below

question 37

Multiple Choice

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

-The expected return of a portfolio that is equally invested in Duke Energy and Microsoft is closest to:

• A)15%
• B)14%
• C)29%
• D)44%

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Definitions:

Firm-Specific

Refers to risk or information that is unique to a particular company and not related to the market or industry.

Covariance

A measure used to determine how two variables change together, indicating the direction of the relationship.

Variance

A statistical measurement of the dispersion of data points in a data set around the mean, indicating the extent to which the numbers differ from each other.

Correlation Coefficient

A statistical measure that determines the degree to which two variables move in relation to each other, where +1 indicates a perfect positive correlation and -1 indicates a perfect negative correlation.