A Portfolio Is Composed of Two Stocks,A and B $\rho$ ; $\rho$

question 21

Multiple Choice

A portfolio is composed of two stocks,A and B. Stock A has a standard deviation of return of 24% while stock B has a standard deviation of return of 18%. Stock A comprises 60% of the portfolio while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is .0380, the correlation coefficient between the returns on A and B is _________.

• A) 0.583
• B) 0.225
• C) 0.327
• D) 0.128 0.0380 = (.6²)(.24²) + (.4²)(.18²) + 2(.6)(.4)(.24)(.18) \(\rho\); \(\rho\) = 0.583

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Definitions:

Reduction-Oxidation

A chemical reaction in which the oxidation states of atoms are changed, typically involving the transfer of electrons.

KOH

KOH, potassium hydroxide, is a strong alkali used in industry and as a reagent in the laboratory, especially in saponification reactions.

Lithium Hydroxide

A chemical compound with the formula LiOH, used primarily as a precursor in the production of lithium greases and batteries.

Strong Base

A substance that has a high capacity to accept protons (H+) and is completely or nearly completely ionized in aqueous solution.