When Stocks with the Same Expected Return Are Combined into a Portfolio

question 51

Multiple Choice

When stocks with the same expected return are combined into a portfolio:

• A)the expected return of the portfolio is less than the weighted average expected return of the stocks.
• B)the expected return of the portfolio is greater than the weighted average expected return of the stocks.
• C)the expected return of the portfolio is equal to the weighted average expected return of the stocks.
• D)there is no relationship between the expected return of the portfolio and the expected return of the stocks.
• E)None of the above.

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Definitions:

Division of Labour

The practice of dividing work into distinct tasks or roles, specialized by individuals or groups, to increase efficiency and productivity.

Hierarchy of Authority

The ordered arrangement of individuals within an organization according to their levels of power or authority, usually from the highest to the lowest rank.

Rationality

The quality of being based on or in accordance with reason or logic.

Functional Structures

An organizational design that groups employees according to their specialized roles or functions, facilitating efficiency and expertise development.