The Expected Returns for Securities ABC and XYZ Are 8

question 111

Multiple Choice

The expected returns for Securities ABC and XYZ are 8 percent and 13 percent,respectively.The standard deviation is 12 percent for ABC and 18 percent for XYZ.There is no relationship between the returns on the two securities.The market return is 12.5 percent with a standard deviation of 16 percent.The risk-free rate is 5 percent.What is the Sharpe ratio of a portfolio with 40 percent of the funds in ABC and 60 percent in XYZ?

• A) 0.47
• B) 0.51
• C) 0.75
• D) 0.93

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Definitions:

Profundal Zone

The deepest zone of a large lake, located below the level of penetration by sunlight. Compare with littoral zone and limnetic zone.

Small Lakes

Bodies of freshwater of relatively small size and depth, often found inland and formed by a variety of geological processes.

Boreal Forest Biome

A vast biome characterized by coniferous forests, cold temperatures, and short growing seasons, located in the northern regions of North America, Europe, and Asia.

Deciduous Trees

Trees that shed their leaves annually, typically in the autumn, to conserve water during the winter or dry season.