You Invest $1,000 in a Complete Portfolio

question 41

Multiple Choice

You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 16% and a standard deviation of 20% and a treasury bill with a rate of return of 6%.
-The return on the risky portfolio is 15%.The risk-free rate as well as the investor's borrowing rate is 10%.The standard deviation of return on the risky portfolio is 20%.If the standard deviation on the complete portfolio is 25%,the expected return on the complete portfolio is _________.

• A) 6.00%
• B) 8.75 %
• C) 10.00%
• D) 16.25%

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Definitions:

Durable Goods

Goods that are intended to last for a long period of time, such as cars, appliances, and furniture, typically requiring more significant investment than non-durable goods.

Nondurable Goods

Items that are consumed or are only useable for a short period before they need replacement due to wear or consumption.

Services

Tasks or activities performed by individuals or companies for the benefit of others, typically in exchange for payment, and are intangible in nature.

Disposable Income

Funding available to households for their spending and saving plans post income tax cuts.