Stocks A, B, and C are similar in some respects: Each has an expected return of 10% and a standard deviation of 25%. Stocks A and B have returns that are independent of one another; i.e., their correlation coefficient, r, equals zero. Stocks A and C have returns that are negatively correlated with one another; i.e., r is less than 0. Portfolio AB is a portfolio with half of its money invested in Stock A and half in Stock B. Portfolio AC is a portfolio with half of its money invested in Stock A and half invested in Stock C. Which of the following statements is CORRECT?
A. Portfolio AC has an expected return that is greater than 25%.
B. Portfolio AB has a standard deviation that is greater than 25%.
C. Portfolio AB has a standard deviation that is equal to 25%.
D. Portfolio AC has a standard deviation that is less than 25%.
E. Portfolio AC has an expected return that is less than 10%.
Answer: D
You might also like to view...
Generally, auditors rely on controls when auditing the property management function and therefore less substantive testing is used.
Answer the following statement true (T) or false (F)
In Microsoft Word 2010, if a collaborator changes your text inappropriately, you can deal with the change by—
a. inserting a comment stating why you disagree with the change. b. Rejecting the change in Track Changes to restore your original text. c. Both a andb. d. Neither a norb.
________ communication is the flow of information from higher to lower levels in an organization's hierarchy.
A. Promotional B. Intrapersonal C. Horizontal D. Asynchronous E. Downward
A money market is the market for trading in securities with maturities over one year and includes such financial assets as stocks and long-term corporate bonds.
Answer the following statement true (T) or false (F)