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Umnica [9.8K]
3 years ago
12

Portfolio AB has half of its funds invested in Stock A and half in Stock B. Portfolio ABC has one third of its funds invested in

each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium, so required returns equal expected returns. Which of the following statements is CORRECT?
a) Portfolio ABC's expected return is 10.66667%.
b) Portfolio AB has a standard deviation of 20%.
c) Portfolio ABC has a standard deviation of 20%.
d) Portfolio AB's required return is greater than the required return on Stock A.
e) Portfolio AB's coefficient of variation is greater than 2.0.
Business
1 answer:
Anit [1.1K]3 years ago
5 0

Answer:

a) Portfolio ABC's expected return is 10.66667%.

Explanation:

Some information is missing:

Stock                Expected         Standard             Beta

                         return              deviation

A                            10%                 20%                 1.0

B                            10%                  10%                 1.0

C                            12%                  12%                 1.4

The expected return or portfolio AB = (1/2 x 10%) + (1/2 x 10%) = 10% (it is the same as the required rate for stock A or B)

The expected return or portfolio ABC = (weight of stock A x expected return of stock A) +  (weight of stock B x expected return of stock B) + (weight of stock C x expected return of stock C) = (1/3 x 10%) + (1/3 x 10%) + (1/3 x 12%) = 3.333% + 3.333% + 4% = 10.667% <u>THIS IS CORRECT</u>

Options B, C, D and E are wrong.

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Joel is behaving in a totally unprofessional & unethical manner

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As such, when Joel discovered the cost discrepancy during the reconciliation, it was actually his responsibility to call the bank's attention to the variance. This is something that clearly falls under his job specification & can be considered as neglect of duty. Joel's decision defeats the very purpose of bank reconciliation, which is to correct any such discrepancy & to the ensure the rectification of transactions. Most importantly, the decision Joel plans to take is very unethical & is against standard accounting practices

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3 years ago
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Answer:

cab fares will be higher.

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