In a Two-Security Portfolio,25% Is Invested in Security a and the Remainder

question 86

Multiple Choice

In a two-security portfolio,25% is invested in Security A and the remainder in Security B.If the portfolio standard deviation is 12%,and the individual standard deviations for Security A and Security B are 22% and 7%,respectively,what is the covariance of the returns on Securities A and B?

• A) 0.017
• B) 0.023
• C) 0.0375
• D) 0.0469

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Definitions:

Foot-In-The-Door Phenomenon

A psychological principle where agreeing to a small initial request increases the likelihood of agreeing to a larger request later.

Attitude

A psychological tendency expressed by evaluating a particular entity with some degree of favor or disfavor, shaping how we perceive and interact with the world.

Fundamental Attribution Error

The tendency to attribute others' behaviors to their character rather than to external factors.

Cognitive Dissonance

The discomfort in one's psyche caused by the coexistence of several contradictory beliefs, ideas, or values.