Exhibit 71
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 66

Multiple Choice

Exhibit 7.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\\hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 10 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 15 \% \\\left( \sigma _ { \mathrm { A } } \right) = 8 \% & \left( \sigma _ { \mathrm { B } } \right) = 9.5 \% \\W _ { \mathrm { A } } = 0.25 & W _ { \mathrm { B } } = 0.75 \\\operatorname { Cov } _ { \mathrm { A } B } = 0.006\end{array}$$
-Refer to Exhibit 7.1. What is the expected return of a portfolio of two risky assets if the expected return E(R_i) , standard deviation ( $\sigma$ _i) , covariance (COV_i,j) , and asset weight (W_i) are as shown above?

• A)8.79%
• B)12.5%
• C)13.75%
• D)7.72%
• E)12%

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Definitions:

Bolt Of Fabric

A large roll of cloth or fabric that is typically measured in yards or meters, used in manufacturing and sewing industries.

Cost-plus-percentage-of-cost Pricing

A pricing strategy where the selling price is determined by adding a specific percentage markup to a product's cost.

Target Profit Pricing

Setting an annual target of a specific dollar volume of profit.

Target Profit Pricing

A pricing strategy where the selling price is determined by adding a desired profit to the cost of the product.