Consider a two-stock portfolio containing Securities A and B. A has the expected return of 10% with standard deviation of 3% while B has the expected return of 20% with standard deviation of 5%. The weights for A and B are 60% and 40% respectively. The correlation coefficient between A and B is -0.3. Calculate the expected return (E(R)) and standard deviation (SD) of the above portfolio.

Select one:

a.E(R)=0.14, SD=0.038

b.E(R)=0.16, SD=0.000508

c.E(R)=0.14, SD=0.0225

d.E(R)=0.14, SD=0.000508

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Question20

Which one of the following is FALSE?

Select one:

a.Resignation of a firm's chief financial officer is a source of unsystematic risk.

b.The risk premium of a share is not affected by unsystematic risk.

c.A maximum reduction in portfolio risk occurs when the correlation coefficient between the two stocks is equal to minus one.

d.Beta is a measure of unsystematic risk.

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Question21

Two years ago, you purchased a new car. You financed your car for 60 months (with payments made at the end of the month) with a loan at 6.1% APR. Your monthly payments are $640.15 and you have just made your 24th monthly payment on your car. Assuming that you have made all of the first 24 payments on time, then the outstanding principal balance on your car loan today is closest to:

Select one:

a.32,271

b.20,496

c.33,033

d.21,011