Stock C is likely to provide the lowest expected return Stock B is likely to provide the highest expected return Stock A is likely to provide the highest expected return Stock A is likely to provide the lowest expected return Stock B is likely to provide the lowest expected return

Stock C is likely to provide the lowest expected return Stock B is likely to provide the highest expected return Stock A is likely to provide the highest expected return Stock A is likely to provide the lowest expected return Stock B is likely to provide the lowest expected return

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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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

Consider the following stocks and pick the best answer.
Standard
Stock
Beta
Deviation
A
25%
1.25
35%
1.15
28%
1.85
Stock C is likely to provide the lowest expected return
Stock B is likely to provide the highest expected return
Stock A is likely to provide the highest expected return
Stock A is likely to provide the lowest expected return
O Stock B is likely to provide the lowest expected return

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