The Two Stocks in Your Portfolio, X and Y, Have

question 121

Multiple Choice

The two stocks in your portfolio, X and Y, have independent returns, so the correlation between them, rXY is zero.Your portfolio consists of $50, 000 invested in Stock X and $50, 000 invested in Stock Y.Both stocks have an expected return of 15%, betas of 1.6, and standard deviations of 30%.Which of the following statements best describes the characteristics of your 2-stock portfolio?

• A) Your portfolio has a standard deviation less than 30%, and its beta is greater than 1.6.
• B) Your portfolio has a beta equal to 1.6, and its expected return is 15%.
• C) Your portfolio has a beta greater than 1.6, and its expected return is greater than 15%.
• D) Your portfolio has a standard deviation greater than 30% and a beta equal to 1.6.
• E) Your portfolio has a standard deviation of 30%, and its expected return is 15%.

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Definitions:

External

refers to something situated on the outside, or beyond the internal or personal; in psychology, it often pertains to factors or influences that originate outside the individual.

Attitudes

A psychological tendency expressed by evaluating a particular entity with some degree of favor or disfavor.

Intention

A mental state involving commitment to carrying out an action or actions in the future.

Social Loafing

The occurrence in which people put in less effort towards reaching a goal when part of a group than they do when working individually.