Use the Table for the Question(s) Below

question 64

Multiple Choice

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

-Which of the following combinations of two stocks would give you the biggest reduction in risk?

• A) Duke Energy and Wal-Mart
• B) Wal-Mart and Microsoft
• C) Microsoft and Duke Energy
• D) No combination will reduce risk.

---

Definitions:

Market Price

The price at which a service or asset is currently available for buy or sell transactions.

Intrinsic Value

An underlying or fundamental value. In securities analysis, the price of a security (usually a stock) derived from extensive analysis of the issuing company and its industry. In financial options, the difference between the market price of the underlying stock and the price at which an option on that stock can be exercised (the strike price) if that difference is positive, zero if it is not.

Stock Dividend

A payment made by a corporation to its shareholders in the form of additional shares, rather than cash.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders, which are reinvested into the business.