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

question 65

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 B.If the two stocks are combined equally in a portfolio, what would be the portfolio's expected return?

• A)4%
• B)12%
• C)20%
• D)Greater than 20%
• E)Need more information to answer.

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Definitions:

Senator Joseph McCarthy

A United States Senator known for leading a campaign against supposed communist infiltration in government and society during the early 1950s.

Television Viewers

Individuals or audiences who watch content on television.

Security Risk

A term indicating a potential threat to the safety or stability of an organization, system, or nation.