Assume That the Risk-Free Rate of Return Is 3% and the Market

question 86

Multiple Choice

Assume that the risk-free rate of return is 3% and the market portfolio on the Capital Market Line (CML) has an expected return of 11% and a standard deviation of 14%.How should you invest $100,000 if you are only willing to accept a total portfolio risk of 8%?

• A) Invest $140,000 in the market portfolio and by borrowing $40,000 at the risk-free rate.
• B) Invest $80,000 in the market portfolio and the remainder in the risk-free security.
• C) Invest $63,636.36 in the market portfolio and the remainder in the risk-free security.
• D) Invest $36,363.64 in the market portfolio and the remainder in the risk-free security.
• E) Invest $100,000 on another portfolio on the CML that does not contain any of the market portfolio or the risk-free security, but has a standard deviation of 8%.

Recognize the importance of social support and lifestyle factors in the prevention and management of heart disease.

Describe the relationship between mental stress and the risk of heart attacks.

Distinguish between different personality types and their relation to health outcomes.

Examine the role of immunity and psychological factors in the onset and progression of cancer.

---

Definitions:

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect exists among the variables studied.

Population Proportions

The fraction or percentage of units in a population that have a particular attribute.

Pooling

The process of combining data from different sources or groups to perform a collective analysis.

Null Hypothesis

A basic assumption or statement that there is no effect or no difference, used as a starting point for statistical testing.