You Have a Portfolio P That Consists of 50% Stock

question 92

Multiple Choice

You have a portfolio P that consists of 50% Stock X and 50% Stock Y. Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. Given this information, which of the following statements is CORRECT?

• A) the required return on portfolio p is equal to the market risk premium (rm- rrf).
• B) portfolio p has a beta of 0.7.
• C) portfolio p has a beta of 1.0 and a required return that is equal to the riskless rate, rrf.
• D) portfolio p has the same required return as the market (rm).
• E) portfolio p has a standard deviation of 20%.

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