Portfolio AB was created by investing in a combination of Stocks A and B. Stock
ID: 2813095 • Letter: P
Question
Portfolio AB was created by investing in a combination of Stocks A and B. Stock A has a beta of 1.2 and a standard deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20%. Portfolio AB has a beta of 1.25 and a standard deviation of 18%.Which of the following statements is CORRECT? A. Portfolio AB has the same amount of money invested in each of the two stocks. B. Stock A has more market risk than Stock B but less stand-alone risk. C. Portfolio AB has more money invested in Stock A than in Stock B. D. Stock A has more market risk than Portfolio AB. E. Portfolio AB has more money invested in Stock B than in Stock A. Portfolio AB was created by investing in a combination of Stocks A and B. Stock A has a beta of 1.2 and a standard deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20%. Portfolio AB has a beta of 1.25 and a standard deviation of 18%.
Which of the following statements is CORRECT? A. Portfolio AB has the same amount of money invested in each of the two stocks. B. Stock A has more market risk than Stock B but less stand-alone risk. C. Portfolio AB has more money invested in Stock A than in Stock B. D. Stock A has more market risk than Portfolio AB. E. Portfolio AB has more money invested in Stock B than in Stock A.
Explanation / Answer
Correct answer is option C Portfolio AB has more money invested in Stock A than in Stock B.
Since the Stock A having lesser beta and higher standard deviation comparing to stock B,stock A will be having a higher proportion of investment in Portfolio AB