Stock X Has a Beta of 0

question 78

Multiple Choice

Stock X has a beta of 0.7 and Stock Y has a beta of 1.3.The standard deviation of each stock's returns is 20%.The stocks' returns are independent of each other,i.e. ,the correlation coefficient,r,between them is zero.Portfolio P consists of 50% X and 50% Y.Given this information,which of the following statements is CORRECT?

• A) Portfolio P has a standard deviation of 20%.
• B) The required return on Portfolio P is equal to the market risk premium (r_M - r_RF).
• C) Portfolio P has a beta of 0.7.
• D) Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate,r_RF.
• E) Portfolio P has the same required return as the market (r_M).

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Definitions:

Schizophrenia

A chronic brain disorder characterized by distorted thinking, perceptions, emotions, language, self-awareness, and behavior.

Temporal Lobes

Regions of the cerebral cortex located beneath the temples, involved in processing auditory information and crucial for memory, speech, and recognizing faces.

Motor Cortex

The part of the cerebral cortex that plays a crucial role in the planning, control, and carrying out of voluntary movements.

Frontal Lobe

The part of the human brain located behind the forehead, associated with reasoning, planning, parts of speech, movement, emotions, and problem-solving.