Given an Optimal Risky Portfolio with Expected Return of 16

question 29

Multiple Choice

Given an optimal risky portfolio with expected return of 16%, standard deviation of 20%, and a risk-free rate of 4%, what is the slope of the best feasible CAL?

• A)0.60
• B)0.14
• C)0.08
• D)0.36

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Definitions:

Life Insurance

A contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured.

Proceeds

The amount of money or assets received from a transaction, sale, or event.

Beneficiary

An individual or entity entitled to benefits or proceeds from an insurance policy, trust, will, or other contracts.

Donee Beneficiary

A third party who benefits from a contract made between two other parties, where the intent is to benefit the third party.