Charlie and Lucinda Each Have $50, 000 Invested in Stock

question 132

Multiple Choice

Charlie and Lucinda each have $50, 000 invested in stock portfolios.Charlie's has a beta of 1.2, an expected return of 10.8%, and a standard deviation of 25%.Lucinda's has a beta of 0.8, an expected return of 9.2%, and a standard deviation that is also 25%.The correlation coefficient, r, between Charlie's and Lucinda's portfolios is zero.If Charlie and Lucinda marry and combine their portfolios, which of the following best describes their combined $100, 000 portfolio?

• A) The combined portfolio's beta will be equal to a simple weighted average of the betas of the two individual portfolios, 1.0; its expected return will be equal to a simple weighted average of the expected returns of the two individual portfolios, 10.0%; and its standard deviation will be less than the simple average of the two portfolios' standard deviations, 25%.
• B) The combined portfolio's expected return will be greater than the simple weighted average of the expected returns of the two individual portfolios, 10.0%.
• C) The combined portfolio's standard deviation will be greater than the simple average of the two portfolios' standard deviations, 25%.
• D) The combined portfolio's standard deviation will be equal to a simple average of the two portfolios' standard deviations, 25%.
• E) The combined portfolio's expected return will be less than the simple weighted average of the expected returns of the two individual portfolios, 10.0%.

Apply decision rules for hypothesis testing based on chi-square statistics.

Calculate expected frequencies for categories within datasets.

Understand and apply the concept of degrees of freedom in the context of chi-square tests.

Determine the rejection or acceptance of null hypotheses based on p-values and significance levels.

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Definitions:

Magnetic Field Rotation

This term refers to the phenomenon seen in rotating machinery and devices like electric motors, where the magnetic field within these devices rotates, causing the rotor to spin.

Phase Rotation

The direction of rotation of a magnetic field produced by the voltages of a poly-phase power system.

Kilovolt-ampere

A unit of apparent power in electrical systems, equivalent to 1,000 volt-amperes, often used in the rating of electrical equipment.

Liquid-cooled

A method of heat dissipation that uses a circulating fluid, typically water or coolant, to remove heat from components.