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:

Muscle Atrophy

The wasting or loss of muscle tissue due to a lack of physical activity or underlying health condition.

Bone Resorption

The process by which osteoclasts break down bone tissue and release minerals, resulting in a transfer of calcium from bone tissue to the blood.

Musculoskeletal System

The body system that includes bones, muscles, joints, tendons, ligaments, and other connective tissues, supporting movement and physical stability.

Footdrop

A condition characterized by difficulty in lifting the front part of the foot, which can cause the foot to drag while walking.