The Price of Microsoft Is $30 Per Share and That

question 102

Multiple Choice

The price of Microsoft is $30 per share and that of Apple is $58 per share. The price of Microsoft increases to $39 per share after one year and to $42 after two years. Also, shares of Apple increase to $66 after one year and to $71 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return over year 1 and year 2? Assume no dividends are paid.

• A) 19.32%, 7.62%
• B) 28.01%, 8.38%
• C) 23.18%, 11.43%
• D) 22.22%, 13.71%

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Definitions:

Unsystematic Risks

Risks that affect a specific company or industry, as opposed to the market as a whole, including management decisions or product recalls.

Well-Diversified Portfolio

An investment portfolio that spreads risk and opportunity across a wide range of assets and sectors, aiming to reduce the impact of any single investment's poor performance.

Diversifiable Risk

A type of investment risk that can be reduced through diversification, relating to factors affecting specific industries, companies, or securities rather than the market as a whole.

Publicly Traded Stocks

Stocks of companies that are traded on public stock exchanges, making them available to buy and sell by investors.