Consider a Risky Portfolio, A, with an Expected Rate of Return

question 35

Multiple Choice

Consider a risky portfolio, A, with an expected rate of return of 0.15 and a standard deviation of 0.15, that lies on a given indifference curve.Which one of the following portfolios might lie on the same indifference curve?

• A)E(r) = 0.15; Standard deviation = 0.20
• B)E(r) = 0.15; Standard deviation = 0.10
• C)E(r) = 0.10; Standard deviation = 0.10
• D)E(r) = 0.20; Standard deviation = 0.15

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Definitions:

Least-squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of the squares of the differences between observed and predicted values.

Mixed Cost

Costs that have both fixed and variable components and change in total with the level of activity, but not proportionately.

Machine-hour

A metric that quantifies the number of hours a machine is utilized to manufacture products during a specified timeframe.

High-low Method

An approach in managerial accounting that approximates variable and fixed costs by examining the maximum and minimum levels of activity.