For a Portfolio Made Up of Three Stocks in Equal

question 137

True/False

For a portfolio made up of three stocks in equal proportion, if stock A's expected return is 12%, stock B's expected return is 16%, and stock C's expected return is 17%, the expected return of the portfolio should be 15.0%.

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment.

Interest Tax Shield

The reduction in income taxes that results from the deductibility of interest expense from taxable income.

Capital Structure

The mix of debt and equity financing a company uses for its operations and growth.