Suppose You Invest Equal Amounts in a Portfolio with an Expected

question 74

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 expected
Return on the resulting portfolio:

• A) 10%
• B) 4%
• C) 12%
• D) none of the above

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Definitions:

Mortgage

A loan used to purchase a property, where the property itself serves as collateral until the loan is paid off.

Investment

The action of allocating resources, usually money, with the expectation of generating an income or profit.

Bond Buyer

An investor who purchases bonds, which are securities that represent a loan made by the investor to the bond issuer.

Saving Rate

The proportion of disposable income that is not spent on consumption but reserved for future use or investment.