You Invest $100 in a Risky Asset with an Expected

question 48

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05. A portfolio that has an expected outcome of $115 is formed by

• A) investing $100 in the risky asset.
• B) investing $80 in the risky asset and $20 in the risk-free asset.
• C) borrowing $43 at the risk-free rate and investing the total amount ($143) in the risky asset.
• D) investing $43 in the risky asset and $57 in the riskless asset.
• E) Such a portfolio cannot be formed.

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Definitions:

Kantian Moral Theory

A philosophical approach to ethics that emphasizes duty, rationality, and the categorical imperative as foundational principles of moral action.

Deontological Evaluation

An ethical assessment based on the principle that the morality of an action is based on its adherence to rules or duties, regardless of the outcomes.

Ethical Dilemma

A situation where one must make a decision between two or more morally correct actions that cannot both be undertaken.

8th Amendment

An amendment to the U.S. Constitution that prohibits the federal government from imposing excessive bail, excessive fines, or cruel and unusual punishment.