The Expected Return of Security a Is 12% with a Standard

question 8

Multiple Choice

The expected return of Security A is 12% with a standard deviation of 15%.The expected return of Security B is 9% with a standard deviation of 10%.Securities A and B have a correlation of 0.4.The market return is 11% with a standard deviation of 13% and the risk-free rate is 4%.Which one of the following is not an efficient portfolio, as determined by the lowest Sharpe ratio?

• A)100% invested in A is efficient
• B)100% invested in B is efficient
• C)41% in A and 59% B is efficient
• D)59% in A and 41% B is efficient

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Definitions:

Sale Price

The actual price at which an item is sold to a buyer.

Procuring

The act of obtaining or acquiring services or goods, often involving a procurement process for businesses or government entities.

Discharge

The release from obligations imposed by the Bankruptcy and Insolvency Act.

Outstanding Mortgage

The remaining amount of money owed on a mortgage not yet repaid to the lender.