If You Invest 40% of Your Investment in GE with an Expected

question 46

Multiple Choice

If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:

• A) 12.4%
• B) 13%
• C) 13.6%
• D) 14.5%

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Definitions:

Long Run

A period in which all inputs, including capital assets, can be adjusted by firms in response to market conditions.

Unit of Account

A standard monetary unit of measurement of the market value/cost of goods, services, or assets.

Real Value

The value of an object or service adjusted for inflation, reflecting its true purchasing power.

Nominal Interest Rate

The interest rate stated on a loan or investment agreement, without adjustment for inflation.