Exhibit 74
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 45

Multiple Choice

Exhibit 7.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\\hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 10 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 8 \% \\\left( \sigma _ { \mathrm { A } } \right) = 6 \% & \left( \sigma _ { \mathrm { B } } \right) = 5 \% \\\mathrm {~W} _ { \mathrm { A } } = 0.3 & \mathrm {~W} _ { \mathrm { B } } = 0.7 \\\mathrm { CO } V _ { \mathrm { A,B } } = 0.0008\end{array}$$
-Refer to Exhibit 7.4. 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)8.6%
• B)8.1%
• C)9.3%
• D)10.2%
• E)11.6%

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