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

question 4

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

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