Using the Formula for the Capital Market Line (Formula 21-5),if $\sigma$

question 30

Multiple Choice

Using the formula for the capital market line (Formula 21-5) ,if the risk-free rate (R_F) is 6%,the market rate of return (K_M) is 12%,the market standard deviation ( $\sigma$ _M) is 11%,and the standard deviation of the portfolio ( $\sigma$ _P) is 14%,compute the anticipated return of the portfolio (K_P) .

• A)20.4%
• B)16.33%
• C)13.64%
• D)13.4%
• E)13.2%

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Definitions:

Variance

A statistical measure of the dispersion showing how much the values in a data set diverge from the mean or expected value.

Wholesaler

A person or company that buys goods in large quantities from producers and sells them in smaller quantities to retailers or other wholesalers.

Retailer

A business or individual that sells goods or services directly to consumers, typically operating out of physical or online stores.

Bullwhip Effect

A situation in supply chain management where slight shifts in demand from consumers cause increasingly amplified shifts in demand at the levels of manufacturers, distributors, and wholesalers.