FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com | Page 97
Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of the
following statements must be true, assuming the CAPM is correct.
Correct Answer:
Question 8
Bob has a $50,000 stock portfolio with a beta of 1.2, an expected
return of 10.8%, and a standard deviation of 25%. Becky also has a
$50,000 portfolio, but it has a beta of 0.8, an expected return of 9.2%,
and a standard deviation that is also 25%. The correlation coefficient, r,
between Bob's and Becky's portfolios is zero. If Bob and Becky marry
and combine their portfolios, which of the following best describes their
combined $100,000 portfolio?
Correct Answer:
Question 9