Solved

Use the Following Information to Answer the Question(s)below

Question 81

Multiple Choice

Use the following information to answer the question(s) below.
Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio) : growth stocks and value stocks.Assume that these two portfolios are equal in size (market value) ,the correlation of their returns is equal to 0.6,and the portfolios have the following characteristics: Use the following information to answer the question(s) below. Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio) : growth stocks and value stocks.Assume that these two portfolios are equal in size (market value) ,the correlation of their returns is equal to 0.6,and the portfolios have the following characteristics: The risk free rate is 3.5%. -Which of the following equations is INCORRECT? A) E[R<sub>xCML</sub>] = r<sub>f</sub> + x(E[R<sub>Mkt</sub>] + r<sub>f</sub>) B) r<sub>i</sub> = r<sub>f</sub> + b(E[R<sub>Mkt</sub>] - r<sub>f</sub>) C) SD(R<sub>xCML</sub>) = xSD(R<sub>Mkt</sub>) D) E[R<sub>xCML</sub>] = (1 - x) r<sub>f</sub> + xE[R<sub>Mkt</sub>] The risk free rate is 3.5%.
-Which of the following equations is INCORRECT?


A) E[RxCML] = rf + x(E[RMkt] + rf)
B) ri = rf + b(E[RMkt] - rf)
C) SD(RxCML) = xSD(RMkt)
D) E[RxCML] = (1 - x) rf + xE[RMkt]

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q5: Which of the following statements is FALSE?<br>A)The

Q18: Consider an equally weighted portfolio that contains

Q19: Use the information for the question(s)below.<br>Suppose you

Q23: Use the table for the question(s)below.<br>Consider the

Q43: Suppose that you want to maximize your

Q59: Use the following information to answer the

Q82: Use the table for the question(s)below.<br>Consider the

Q83: Use the information for the question(s)below.<br>Suppose that

Q94: Use the following information to answer the

Q124: Use the information for the question(s)below.<br>Suppose that