Stocks A, B, and C Are Similar in Some Respects

question 79

Multiple Choice

Stocks A, B, and C are similar in some respects: Each has an expected return of 10% and a standard deviation of 25%. Stocks A and B have returns that are independent of one another; i.e., their correlation coefficient, r, equals zero. Stocks A and C have returns that are negatively correlated with one another; i.e., r is less than 0. Portfolio AB is a portfolio with half of its money invested in Stock A and half in Stock B. Portfolio AC is a portfolio with half of its money invested in Stock A and half invested in Stock C. Which of the following statements is CORRECTσ

• A) portfolio ac has an expected return that is greater than 25%.
• B) portfolio ab has a standard deviation that is greater than 25%.
• C) portfolio ab has a standard deviation that is equal to 25%.
• D) portfolio ac has a standard deviation that is less than 25%.
• E) portfolio ac has an expected return that is less than 10%.

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Definitions:

Demographic Increase

The growth in the number of individuals in a population, often measured by birth rates or migration patterns.

Marital Rape

The act of sexual assault perpetrated by one spouse against the other, recognized as a crime in many jurisdictions.

Strictly Enforced

Regulations or rules that are applied rigorously and without exceptions, ensuring compliance.

Family Violence

Acts of violence or abuse committed within the context of familial relationships.