Given the following information on three stocks assuming: Stock Expected Return A B с Standard Deviation 0.06 0 0.1 0.25 0.267 0.375 Assume further the following portfolio co-variances: AB = 0, AC = 0 and BC -0.05333. Now suppose you diversify into two securities. Given the three choices of possible portfolio combinations, can any portfolio be eliminated because it is dominated by at least one of the other portfolio combinations? Assume equal weights. Select one:

Given the following information on three stocks assuming: Stock Expected Return A B с Standard Deviation 0.06 0 0.1 0.25 0.267 0.375 Assume further the following portfolio co-variances: AB = 0, AC = 0 and BC -0.05333. Now suppose you diversify into two securities. Given the three choices of possible portfolio combinations, can any portfolio be eliminated because it is dominated by at least one of the other portfolio combinations? Assume equal weights. Select one:

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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Question

Given the following information on three stocks assuming:
Stock
Expected Return
A
0.06
0.1
0.267
Assume further the following portfolio co-variances: AB = 0, AC = 0 and BC -0.05333.
Now suppose you diversify into two securities. Given the three choices of possible portfolio
combinations, can any portfolio be eliminated because it is dominated by at least one of the
other portfolio combinations? Assume equal weights.
Select one:
B
с
Standard Deviation
a. Portfolio (A,B) should be eliminated
b. Portfolio (A,C) should be eliminated
c. Portfolio (B,C) should be eliminated
d. Portfolio (A,B) and Portfolio (A,C) should be eliminated
e. Portfolio (A,B) and Portfolio (B,C) should be eliminated
f. Portfolio (A,C) and Portfolio (B,C) should be eliminated
No Portfolio dominates the others.
0
0.25
0.375

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