Multiple choice
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____ 28. Here are the expected returns on two stocks:
Returns
Probability X Y
0.1 -20% 10%
0.8 20 15
0.1 40 20
If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation?
a. 16.5%
b. 10.5%
c. 13.4%
d. 8.1%
e. 20.0%
____ 32. A share of preferred stock pays a quarterly dividend of $1.00. If the price of the stock is $50, what is the nominal (not effective) annual rate of return?
a. 8.0%
b. 8.5%
c. 10.0%
d. 9.0%
e. 9.5%
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Solution Summary
The solution explains two multiple choice questions relating to standard deviation and annual rate of return
Solution Preview
1. We first calculate the portfolio return for each probability. The portfolio return for 0.1 is 0.5X-20%+0.5X10%=-5%. Return for 0.8 is ...
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