Business, 07.04.2020 04:30, momochan74301
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 AB has a standard deviation that is greater than 25%.
b. Portfolio AC has an expected return that is less than 10%.
c. Portfolio AC has a standard deviation that is less than 25%.
d. Portfolio AB has a standard deviation that is equal to 25%.
e. Portfolio AC has an expected return that is greater than 25%.
Answers: 3
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Stocks A, B, and C are similar in some respects: Each has an expected return of 10% and a standard d...
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