Stocks A, B, and C Are Similar in Some Respects

question 131

Multiple Choice

Stocks A, B, and C are similar in some respects: Each has an expected return of 10% and a standard deviation of 25%.Stocks A and B have returns that are independent of one another; i.e., their correlation coefficient, r, equals zero.Stocks A and C have returns that are negatively correlated with one another; i.e., r is less than 0.Portfolio AB is a portfolio with half of its money invested in Stock A and half in Stock B.Portfolio AC is a portfolio with half of its money invested in Stock A and half invested in Stock C.Which of the following statements is CORRECT?

• A) Portfolio AC has an expected return that is greater than 25%.
• B) Portfolio AB has a standard deviation that is greater than 25%.
• C) Portfolio AB has a standard deviation that is equal to 25%.
• D) Portfolio AC has a standard deviation that is less than 25%.
• E) Portfolio AC has an expected return that is less than 10%.

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Definitions:

Dopamine Receptors

Proteins located on the surface of neurons that bind to the neurotransmitter dopamine and play a crucial role in brain function.

Antipsychotic Drugs

Medications used to manage psychosis, particularly in disorders like schizophrenia and bipolar disorder, by affecting brain chemistry.

Tardive Dyskinesia

Rephrased: A serious side effect of antipsychotic medications, involving uncontrollable movements especially of the face and limbs.

Antipsychotic Drugs

Medications used to treat psychiatric conditions by altering brain chemistry, primarily to manage symptoms of psychosis such as hallucinations and delusions.