If the expected return is above the required return on an asset, ...

[bobthebuilder]

If the expected return is above the required return on an asset, rational investors will:
 
  A) Buy the asset, which will drive the price up and cause expected return to reach the required return.
  B) Sell the asset, which will drive the price down and cause the expected return to reach the required return.
  C) Sell the asset, which will drive the price up and cause the expected return to reach the required return.
  D) Sell the asset, since price is expected to decrease.

Question 2

Stocks A, B, C, and D have returns of 10, 20, 30, and 40, respectively. What is their variance?
 
  A) 66.67
  B) 166.67
  C) 4.08
  D) 2.15

[soda0602]

Answer to Question 1

A

Answer to Question 2

Answer: B
Explanation: B) Mean return = (10 + 20 + 30 + 40)/4 = 25, so
variance = (10 - 25)2 + (20 - 25)2 + (30 - 25)2 + (40 - 25)2/(4 - 1)
= 500 /3 = 166.67.