Stocks a and B Have Alphas of

question 18

Multiple Choice

Stocks A and B have alphas of .01 and betas of .90.Stock A has a residual variance of .020 while stock B has a residual variance of .016.If stock A represents 2% of an active portfolio,stock B should represent __________ of an active portfolio.

• A) 1.6%
• B) 2.0%
• C) 2.2%
• D) 2.5%

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Definitions:

Informational Report

A document that presents facts and data without analysis, aimed at informing readers about specific topics or events.

Chain Of Events

A sequence of occurrences or actions that are linked and often lead to a particular result or conclusion.

Representative Sample

A subset of a population that accurately reflects the members of the entire population.

Entire Population

All members of a specified group without exception, commonly referred to in studies, surveys, and statistical analyses.