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

question 4

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%.What is the Sharpe ratio of a portfolio if 35% of the portfolio is in Security A and the remainder in Security B?

• A)0.54
• B)0.61
• C)0.86
• D)1.02

---

Definitions:

Reannexation

A term referring to the act of annexing something again or reclaiming territory that was once part of a country or jurisdiction.

Louisiana Purchase

President Thomas Jefferson’s 1803 purchase from France of the important port of New Orleans and 828,000 square miles west of the Mississippi River to the Rocky Mountains; it more than doubled the territory of the United States at a cost of only $15 million.

Democrats

Members or supporters of the Democratic Party in the United States, one of the two major contemporary political parties in the country, generally representing liberal and progressive positions.

Forty-ninth Parallel

The 49th parallel north, a circle of latitude that is 49 degrees north of the Earth's equatorial plane, often referred to as the boundary between Canada and the United States in the western part of North America.