Stocks a and B Each Have an Expected Return of 15

question 20

Multiple Choice

Stocks A and B each have an expected return of 15%, a standard deviation of 20%, and a beta of 1.2.The returns on the two stocks have a correlation coefficient of +0.6.Your portfolio consists of 50% A and 50% B.Which of the following statements is CORRECT?

• A) The portfolio's expected return is 15%.
• B) The portfolio's standard deviation is greater than 20%.
• C) The portfolio's beta is greater than 1.2.
• D) The portfolio's standard deviation is 20%.
• E) The portfolio's beta is less than 1.2.

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Definitions:

Product Liability Law

Legal principles that hold manufacturers, distributors, suppliers, and retailers accountable for any damages caused by defective or dangerous products.

Tort Law

An area of law that deals with civil wrongs and damages, not arising out of contractual obligations, that one party suffers at the hands of another.

Product Liability

The legal responsibility that manufacturers or sellers have to compensate for harm caused by defective or dangerous products.

Tort Law

A segment of law that addresses, rectifies, and provides remedies for civil wrongs not arising out of contractual obligations.