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:

Claim

A formal assertion of one's right to money, property, or legal remedy due to harm or wrongdoing experienced.

Bad Faith

An intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealings.

Denies Coverage

The act of an insurance company refusing to pay out a claim on an insurance policy.

Policy's Coverage

Refers to the range of protection provided by an insurance policy against various risks or losses.