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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Definitions:

Clutch Pack

A component of an automatic transmission consisting of multiple discs and plates that engage and disengage to change gears.

Clutch Free Pedal

The free downward travel of a clutch pedal during which the clutch release linkage takes up the 1/8 inch (3 mm) of free travel between the release forks and the clutch release bearing. After clutch free pedal has been taken up, the clutch begins to release as the pedal continues to be depressed. Clutch free pedal is correctly set at between 1½ and 2 inches (3.8 and 5 cm).

Release Yoke Fingers

Components in a clutch mechanism that disengage the clutch disc from the flywheel, allowing the transmission to shift gears.

Push Type Clutch

A clutch mechanism activated by pushing a pedal, which disengages the drive shaft to change gears or stop the vehicle without stalling the engine.