You Invest $100 in a Risky Asset with an Expected

question 59

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T-bill with a rate of return of 0.045. What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.13?

• A)130.77% and -30.77%
• B)-30.77% and 130.77%
• C)67.67% and 33.33%
• D)57.75% and 42.25%

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Definitions:

Expectation

The belief or anticipation that something will happen or is likely to happen, influencing perceptions and behaviors.

Group of People

A collection of individuals who are together either by choice or accidentally, sharing or engaging in common activities or goals.

Negative Attitude

A pattern of thinking where individuals expect the worst and see the downside in situations.

Social Perception

The process through which we form impressions of and make inferences about other people and social situations.