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NEW QUESTION: 1
Assume that a U.S. investor can invest in two asset classes: Domestic and Foreign Bonds. The data in the following table are risk and return data calculated in U.S. Dollar terms. Given this data, which of the following choices is most likely the correct risk/return combination for a portfolio weighted 50 percent in domestic bonds and 50 percent in foreign bonds?
A. Risk of 6.00%, Return of 9.25%.
B. Risk of 7.50%, Return of 8.25%.
C. Risk of 10.00%, Return of 13.50%.
D. Risk of 8.00%, Return of 10.90%.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
According to portfolio theory and the principle of diversification, we would expect that adding more of a security that has a low correlation to an existing portfolio would lower the portfolio risk. Since the correlation between foreign and domestic bonds is low at 0.50, we would expect the risk of the portfolio to decline below 8.00% when we replace domestic bonds with foreign bonds. This narrows the possible correct responses to the two with risk less than 8.00%. In addition, we would expect the return to increase, as the return on foreign bonds is higher than that on domestic bonds, butremain slightly lower than that for the portfolio that is 20% domestic and 80% foreign. We can calculate the estimated portfolio return as the weighted average of returns for the individual asset classes. (0.50 * 12) + (0.50 * 6.5) = 9.25%
NEW QUESTION: 2
Which of the following statements is true in respect of ST's gross profit margin based on the information given?
A. Gross profit margin has increased as a result of management negotiating a premium price for the contract with the new customer.
B. Gross profit margin has reduced due to the increased cost of the new contract.
C. Economies of scale have been achieved from increased revenues resulting in a reduction in the gross profit margin.
D. The associate's gross profit margin is greater than ST's leading to an overall increase in ST's margin.
Answer: A
NEW QUESTION: 3
A. Option B
B. Option D
C. Option A
D. Option C
Answer: B