Exhibit 75
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 31

Multiple Choice

Exhibit 7.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\\hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 8 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 15 \% \\\left( \sigma _ { \mathrm { A } } \right) = 7 \% & \left( \sigma _ { \mathrm { B } } \right) = 10 \% \\W _ { \mathrm { A } } = 0.4 & W _ { \mathrm { B } } = 0.6 \\\mathrm { COV } V _ { \mathrm { A,B } } = 0.0006\end{array}$$
-Refer to Exhibit 7.5. 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)8.0%
• B)12.2%
• C)7.4%
• D)9.1%
• E)11.6%

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Definitions:

Rejection Region

The range of values for which the null hypothesis is not considered probable and is rejected in hypothesis testing.

P-value

The probability of obtaining test results at least as extreme as the results observed during the test, assuming that the null hypothesis is correct.

F Value

A statistic used in ANOVA tests, representing the ratio of variance between groups to variance within groups.

P-value

The likelihood of achieving a test statistic as extreme or more so than the observed one, under the assumption that the null hypothesis holds.