Stocks a and B Each Have an Expected Return of 15%,a

question 95

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.You have a portfolio that consists of 50% A and 50% B.Which of the following statements is CORRECT?

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

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Definitions:

Productivity

The measure of the efficiency of production, often evaluated as the ratio of outputs to inputs in a manufacturing or service process.

Double-Declining-Balance

An accelerated method of depreciation calculating depreciation at twice the rate of the straight-line depreciation method.

Salvage Value

The assessed worth of an asset at the expiration of its life of usefulness.

Depreciation Expense

The organized spreading of a tangible asset's expense over the duration of its utility.