If 40 of the funds are invested in stock a and the

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Unformatted text preview: as an expected return of 10% per year and stock B has an expected return of 20%. If 40% of the funds are invested in stock A, and the rest in stock B, what is the expected return on the portfolio of stock A and stock B? a. 10% b. 20% c. 16% d. None of the above ANS: C Solution: From slide 19, we have the formula: !! = !! !! + !! !! . From problem, we have the information: !! = 40%, !! = 10%, !! = 60%, !! = 20%. Therefore, !! = !! !! + !! !! =0.40×(10%) + 0.60×(20%) = 16% 3. A statistical measure of the degree to which securities' returns move together is called correlation of coefficient. Which of th...
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This note was uploaded on 07/31/2013 for the course FIN 504 taught by Professor Harper,j during the Summer '08 term at Texas A&M University–Commerce.

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