Question
Stocks A and B are quite similar: Each has an expected rate of return of 14%, a beta of 1.1, and a standard deviation of
Stocks A and B are quite similar: Each has an expected rate of return of 14%, a beta of 1.1, and a standard deviation of 15%. The rates of return on the two stocks have a correlation coefficient of +0.5. Portfolio Q has 50% invested in Stock A and 50% invested in Stock B. Which of the following statements is CORRECT?
A Portfolio Q has a standard deviation that is less than 15%.
B Portfolio Q has an expected rate of return that is less than 14%.
C Portfolio Q has a standard deviation that is greater than 15%.
D Portfolio Q has a beta that is less than 1.1.
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Public Finance
Authors: Harvey S Rosen, Ted Gayer
9th International Edition
0071267883, 9780071267885
