Stock a Has an Expected Return of 20%, and Stock

question 31

Multiple Choice

Stock A has an expected return of 20%, and stock B has an expected return of 4%. However, the risk of stock A as measured by its variance is 3 times that of stock VB. If the two stocks are combined equally in a portfolio, what would be the portfolio's expected return?

• A) 20.0%.
• B) 4.0%.
• C) 12.0%.
• D) Greater than 20%.

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Definitions:

Air Brakes

Pneumatically actuated brakes used on most heavy-duty trucks. These brakes use air pressure to brake the vehicle by means of diaphragms, levers, S-cams, wedges, and rotor assemblies.

Safety Pressure Relief Valve

A term used to describe the pressure relief valve used on truck air brake systems more often known as a pop-off valve. Most pop-off valves are set to trip at 150 psi and are located on the supply (wet) tank in the system.

Truck Safety

Measures and practices implemented to ensure the safe operation of trucks, including equipment standards and driving regulations.

Pop-Off Valve

A safety device designed to release pressure from a system once it exceeds a predetermined level to prevent damage.