Exhibit 715
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 88

Multiple Choice

Exhibit 7.15
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\\hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 14 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 16 \% \\\left( \sigma _ { \mathrm { A } } \right) = 13 \% & \left( \sigma _ { \mathrm { B } } \right) = 18 \% \\\mathrm {~W} _ { \mathrm { A } } = 0.4 & \mathrm {~W} _ { \mathrm { B } } = 0.6 \\\mathrm { CO } V _ { \mathrm { AB } } = 0.0024\end{array}$$
-Refer to Exhibit 7.15. 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)13.8%
• B)14.6%
• C)15.0%
• D)15.2%
• E)16.8%

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Definitions:

Approach Versus Inhibition

A psychological construct that describes the tendency of individuals to move towards rewards or positive experiences (approach) or away from punishments or negative experiences (inhibition).

Multiple Husbands

A marital arrangement where a woman has several husbands at the same time; also known as polyandry.

Groupthink

A phenomenon in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.

Task Orientation

A focus on completing assigned tasks or achieving specific goals, often used to describe work ethics or learning strategies.