Exhibit 7.3 The Following Questions Are Based on the Problem Below

question 31

Multiple Choice

Exhibit 7.3
The following questions are based on the problem below.
An investor has $150,000 to invest in investments A and B. Investment A requires a $10,000 minimum investment, pays a return of 12% and has a risk factor of .50. Investment B requires a $15,000 minimum investment, pays a return of 10% and has a risk factor of .20. The investor wants to maximize the return while minimizing the risk of the portfolio. The following minimax formulation of the problem has been solved in Excel.
-Refer to Exhibit 7.3. Which value should the investor change, and in what direction, if he wants to reduce the risk of the portfolio?

• A) D11, increase
• B) D12, increase
• C) C12, increase
• D) D12, decrease

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Definitions:

Arbitration Clauses

Provisions in a contract that require disputes to be resolved through arbitration, instead of through court litigation.

Arbitration

A method of resolving disputes outside the courts, where the parties to a dispute refer it to one or more arbitrators who make a binding decision.

Legal Proceedings

Formal activities carried out by a court, such as trials or hearings, to resolve disputes or enforce laws.

Judicial Review

The power of courts to assess the constitutionality of legislative acts or decisions made by the government or other public bodies.