Portfolio AB Was Created by Investing in a Combination of Stocks

question 132

Multiple Choice

Portfolio AB was created by investing in a combination of Stocks A and B. Stock A has a beta of 1.2 and a standard deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20%. Portfolio AB has a beta of 1.25 and a standard deviation of 18%. Which of the following statements is CORRECT?

• A) stock a has more market risk than stock b but less stand-alone risk. a.
• B) portfolio ab has more money invested in stock a than in stock b.
• C) portfolio ab has the same amount of money invested in each of the two stocks.
• D) portfolio ab has more money invested in stock b than in stock a.
• E) stock a has more market risk than portfolio ab.

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Definitions:

Raw Materials Inventory

Stock of materials that are to be used in the production of goods, not yet processed or incorporated into finished products.

Raw Materials

Raw Materials are the basic substances or components that are converted through manufacturing processes into finished goods.

Raw Materials Inventory

Items and supplies held in stock that are used in the manufacturing process to create finished goods.

Materials Quantity Variance

This variance measures the difference between the actual quantity of material used in production and the standard quantity allowed, multiplied by the standard cost per unit of material.