Given an Optimal Risky Portfolio with Expected Return of 16

question 52

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
• E) 0.31

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Definitions:

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Internal Rate

The rate of return that makes the net present value of all cash flows from a particular project equal to zero.

Payback Period

The length of time that it takes for a project to fully recover its initial cost out of the net cash inflows that it generates.

Investment

Allocation of capital or resources to assets with the expectation of generating profit or income.