Stocks A and B each have an expected return of 15%, a standard deviation of 20%,
ID: 2345889 • Letter: S
Question
Stocks A and B each have an expected return of 15%, a standard deviation of 20%, and a beta of 1.2. The returns on the two stocks have a correlation coefficient of +0.6. You have a portfolio that consists of 50% A and 50% B. Which of the following statements is CORRECT?a.
The portfolio's beta is less than 1.2.
b.
The portfolio's beta is greater than 1.2.
c.
The portfolio's expected return is 15%.
d.
The portfolio's standard deviation is greater than 20%.
e.
The portfolio's standard deviation is 20%.
Explanation / Answer
c. The portfolio's expected return is 15%.