1. A portfolio comprises two stocks, A and B, with eqaul amounts of money invest
ID: 2698412 • Letter: 1
Question
1. A portfolio comprises two stocks, A and B, with eqaul amounts of money invested in each. If stock A's stock price increases and that of stock B decreases, the weight of stock A in the portfolio will increase.
a. True
b. False
2. if one stock in a value-weighted portfolio goes up in price and all other stock prices remain the same, what trades are necessary to keep the portfolio value weighted?
a. Sell some of the stock that went up
b. buy more of the stock that went up
c. none
d. cannot tell
3. if the return of two stocks has a correlation of 1, what does this imply about the relative movements in the stock prices?
a. the returns of the two stocks are unrelated
b. for each dollar increase in the price of one stock, the other stock also increases by a dollar
c. the percentage change in the stocks prices are exactly opposite of each other - for every positive change in the one stock, the other stock has a negative change
d. if the price of one stock goes up, the other stock price always goes up as well
Please help these questions!!
Explanation / Answer
1. 1. True
2. 2. A.
3. 3. D.
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