An Investor Plans to Invest 75% of Her Funds in the Common

question 39

Multiple Choice

An investor plans to invest 75% of her funds in the common stock of Gamma Industries and 25% in Epsilon Company. The expected return on Gamma is 12%, and the expected return on Epsilon is 16%. The standard deviation of returns for Gamma is 8% and for Epsilon is 12%. The correlation between the returns for Gamma and Epsilon is +0.8. Determine the expected return on the investor's portfolio.

• A) 14%
• B) 12%
• C) 13%
• D) 9%

---

Definitions:

Ultrasound

A medical imaging technique that uses high-frequency sound waves to create images of structures within the body, commonly used in pregnancy.

Cell-free Fetal DNA

Fragments of the fetus's DNA that circulate in the maternal blood, used in non-invasive prenatal testing to assess the risk of certain genetic disorders without risking miscarriage.

Noninvasive Prenatal Testing

A method of determining the risk of a fetus having certain genetic abnormalities using a blood sample from the mother.

Procedure

A specified series of actions or operations which have to be executed in the same manner in order to achieve a desired result.