Suppose You Have $5,000 to Invest in a Risk-Free Asset

question 74

Multiple Choice

Suppose you have $5,000 to invest in a risk-free asset and the market portfolio.The expected return on the market portfolio is 13.5% with a standard deviation of 18%.The risk-free rate is 4.25%.How much of your funds should be in the risk-free asset if the portfolio has an expected return of 10%?

• A)$1,892
• B)$2,091
• C)$2,909
• D)$3,108

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Definitions:

Consideration

A leadership behavior characterized by showing concern and respect for followers, attending to their needs, and creating a supportive environment.

Distinct And Independent

Refers to two or more items or concepts that are clearly different from each other and operate or exist separately.

Middle-Of-The-Road Management

A management style balancing between task completion and employees' welfare, seeking moderate performance through compromise.

Compromising

A conflict resolution strategy where both parties give up something of value to come to a mutually acceptable agreement.