The Standard Deviation of Returns on Warchester Shares Is 20

question 67

True/False

The standard deviation of returns on Warchester shares is 20% and on Shoesbury shares it is 16%.The coefficient of correlation between the shares is .75.The standard deviation of any portfolio combining the two shares will be less than 20%.

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Definitions:

Industry Curve

A graphical representation showing how the average costs of production change as the total output of an industry changes.

Private Bargaining

The process of negotiating terms directly between parties without external intervention.

Externality

An outcome from economic behavior that impacts individuals not directly involved, which may be beneficial or harmful.

Initial Assignment

The initial distribution or allocation of tasks, responsibilities, or resources at the start of a project or process.