You Invest $100 in a Risky Asset with an Expected

question 7

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T-bill with a rate of return of 0.03. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.08?

• A) 30% and 70%
• B) 50% and 50%
• C) 60% and 40%
• D) 40% and 60%
• E) Cannot be determined.

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Definitions:

Mores

The customs, norms, and behaviors that are considered morally significant or obligatory in a particular society, guiding moral and ethical conduct.

Sanction

Actions that are taken to enforce rules, consisting of penalties for noncompliance or incentives for compliance.

Taboos

Social or cultural practices that are prohibited or restricted by societal norms.

Mores

Strongly held norms or customs considered vital to the functioning of a society, often embodying its moral views and principles.