Suppose You Invest Equal Amounts in a Portfolio with an Expected

question 11

Multiple Choice

Suppose you invest equal amounts in a portfolio with an expected return of 16 percent and a standard deviation of returns of 18 percent and a risk-free asset with an interest rate of 4 percent.
Calculate the expected return on the resulting portfolio.

• A)10 percent
• B)4 percent
• C)12 percent
• D)9 percent

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Definitions:

Cartels

Coalitions of independent businesses formed to regulate production, pricing, and marketing of goods to maximize collective profits.

Price Leadership

A market situation where one or more dominant firms set the price of goods or services, and other firms in the industry follow suit.

Kinked-Demand Curve Model

An economic theory suggesting that prices become rigid or sticky due to competing firms' responses to price changes.

Collusion

A secret agreement between firms in a market to fix prices, limit production, or divide markets, in order to reduce competition and increase profits.