A Portfolio Consists of Two Securities: a Risk-Free Asset and an Equity

question 64

Multiple Choice

A portfolio consists of two securities: a risk-free asset and an equity security.The expected return on the risk-free asset is 4.25%.The expected return of the equity security is 16% with a standard deviation of 22%.What is the portfolio standard deviation if the expected return for the portfolio is 12%?

• A)6.99%
• B)7.49%
• C)10.55%
• D)14.51%

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Definitions:

Aphagia

The inability to swallow or the loss of swallowing reflex, often due to neurologic or muscular disorders.

Hyperphagia

Overeating that leads to significant weight gain.

Lesioned

Having suffered damage or injury to a body part, organ, or tissue, often referring to specific areas of the brain in medical contexts.

Hypothalamus

A small region of the brain that plays a critical role in hormone production, regulation of body temperature, hunger, thirst, and circadian rhythms.