Stocks A and B have the following historical returns:YearStock A returnStock B return2004(24.25%)5.5%200518.5%26.73%200638.67%48.25%200714.33%(4.5%)200839.13%43.86%If more randomly selected stocks had been included in the portfolio, which of the following is the most accurate statement of what would have happened to p?p would have remained constant.p would have been in the vicinity of 20%.p would have declined to zero if enough stocks had been included.

If more randomly selected stocks had been included in the portfolio, which of the following is the…

Answered: If more randomly selected stocks had…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...

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Stocks A and B have the following historical returns:

Year	Stock A return	Stock B return
2004	(24.25%)	5.5%
2005	18.5%	26.73%
2006	38.67%	48.25%
2007	14.33%	(4.5%)
2008	39.13%	43.86%

If more randomly selected stocks had been included in the portfolio, which of the following is the most accurate statement of what would have happened to p?
p would have remained constant.
p would have been in the vicinity of 20%.

p would have declined to zero if enough stocks had been included.

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