Assume a Portfolio Has the Possibility of Returning 7%, 8

question 45

Multiple Choice

Assume a portfolio has the possibility of returning 7%, 8%, 10%, or 12%, with likelihood of 20%, 30%, 25%, and 25%, respectively. The standard deviation for the portfolio is:

• A)5.717%.
• B)3.510%.
• C)1.873%.
• D)6.480%.
• E)3.842%.

Recognize the regulatory environment and compliance required for different business forms.

Understand the implications of business form selection on liability and tax obligations.

Learn the constraints and flexibilities of franchise agreements, including territorial rights and obligations.

Grasp the role of intellectual property law in franchising.

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Definitions:

Risk Premium

The additional return an investor expects to receive for taking on additional risk compared to a risk-free asset.

Multifactor APT

A model that describes the return of a security or portfolio in relation to various risk factors and the expected return on the assets, extending the concepts of the Capital Asset Pricing Model (CAPM).

Expected Return

The average of all possible returns for an investment, weighted by the likelihood of each outcome, representing the mean of the probability distribution of returns.

APT

The Arbitrage Pricing Theory, an asset pricing model that predicts a security's returns using the linear relationship of its expected return with macroeconomic factors.