Suppose You Invest Equal Amounts in a Portfolio with an Expected

question 65

Multiple Choice

Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns of 20% and a risk-free asset with an interest rate of 4%; calculate the standard deviation of the returns on the resulting portfolio:

• A) 8%
• B) 10%
• C) 20%
• D) none of the above

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Definitions:

Tax Rate

The share of profits or income that is levied as tax on a person or a corporation.

Minimum Bid

The lowest price that a seller is willing to accept for an item being sold at auction.

Net Working Capital

The variance between an organization's immediate assets and its short-term obligations, reflecting its short-term fiscal well-being.

Straight-Line Depreciation

A method of evenly distributing the cost of a tangible asset over its useful life, resulting in a fixed annual depreciation expense.