You Own a Portfolio That Is Invested 50% in a Risk-Free

question 38

Multiple Choice

You own a portfolio that is invested 50% in a risk-free asset and 50% in a stock that is equally as risky as the market. The risk-free asset has an expected return of 5%. Your portfolio has an
Expected return of 8.80%. What is the expected return on the market?

• A) 11.60%
• B) 11.75%
• C) 12.30%
• D) 12.35%
• E) 12.60%

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Definitions:

Maximize Profits

A business goal to achieve the highest possible profit by optimizing sales revenue and minimizing costs.

Constant Marginal

Pertains to a situation where the additional cost or benefit of producing one more unit of a good or service remains unchanged.

Average Cost

The sum of all production expenses divided by the amount of product made.

Marginal Revenue

The surplus revenue collected from the sale of an extra unit of a good or service.