USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 38

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.

-Refer to Exhibit 6.14. What is the expected return of the stock A and B portfolio?

• A) 17.0%
• B) 17.5%
• C) 18.0%
• D) 18.5%
• E) 19.0%

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Definitions:

Levels

Different values or categories that a variable can take, often used in the context of categorical variables in research.

dfWG

Degrees of freedom within groups, a term used in statistical analysis, particularly ANOVA, to indicate the number of independent pieces of information available to estimate variances within the groups.

Degrees of Freedom

A concept in statistics that refers to the number of values in a calculation that are free to vary without violating the constraints of the calculation.

Levels Minus One

In analysis of variance (ANOVA), it refers to the number of levels in a factor minus one, which dictates the number of comparisons that can be made.