Security a Offers an Expected Return of 14%, with a Standard

question 63

Multiple Choice

Security A offers an expected return of 14%, with a standard deviation of 8%. Security B offers an expected return of 11%, with a standard deviation of 6%. If you wish to construct a portfolio with a 12.8% expected return, what percentage of the portfolio will consist of security A?

• A) 55%
• B) 60%
• C) 65%
• D) 45%

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Definitions:

Gross Cost

Gross Cost refers to the total expense incurred before any deductions, such as discounts or rebates, providing a raw figure of the financial outlay for a purchase or project.

Commission

A fee paid for provided services, typically a percentage of the transaction value, often used in sales, brokerage, and real estate transactions.

Principals

Refers to the original sum of money borrowed in a loan, or put into an investment.

Gross Cost

Gross cost refers to the total cost of a product or service before any deductions, such as discounts or rebates, are applied.