questions (21-23)

QUESTION 21 The following information is relevant for Questions 20-23: Stock A Stock B Investment $3,000 $7,000 Expected return 16% 9% Standard deviation 50% 40% Correlation between A and B 0.30 20. The expected return and standard deviation of a portfolio of Stock A and Stock B are: A expected return = 13.9%; standard deviation = 40.3% B. expected return = 11.1%; standard deviation = 35.5% C. expected return = 11.1%; standard deviation = 33.7% OD. expected return = 13.9%; standard deviation = 35.5% QUESTION 22 If the correlation between the returns of Stocks A and B was 0.80 instead of 0.30, which of the following statements would be true? A. the expected return on the portfolio would not change, and the standard deviation would increase B. the expected return on the portfolio would increase, and the standard deviation would increase OC. the expected return on the portfolio would not change, and the standard deviation would decrease D. the expected return on the portfolio would decrease, and the standard deviation would increase QUESTION 23 If Stock B is replaced by Treasury bills yielding 3% , the expected return and standard deviation of the portfolio are: A. expected return = 12.1%; standard deviation = 15.0 % B. expected return = 12.1%; standard deviation = 35.0% C, expected return = 6.9%; standard deviation = 50.0% D. expected return = 6.9%; standard deviation = 15.0%