The Standard Deviation of Returns on Warchester Shares Is 20

question 89

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 stocks is .75.The standard deviation of any portfolio combining the two stocks will be less than 20%.

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Definitions:

Period Costs

Expenses that are not directly tied to the production process and are accounted for in the period they are incurred, such as selling and administrative expenses.

Weighted Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all units available for sale during the period.

Equivalent Units

A concept in process costing that converts partially completed units into a number of fully completed units to accurately calculate costs.

Job Costing

An accounting method used to track the costs associated with a specific job or project to determine its profitability.