An Investor Can Design a Risky Portfolio Based on Two

question 31

Multiple Choice

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is .50. The risk-free rate of return is 10%. The expected return on the optimal risky portfolio is ________.

• A) 14%
• B) 15.6%
• C) 16.4%
• D) 18%

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Definitions:

Physical Duress

A situation where an individual is forced to act against their will or consent due to the threat of physical harm or actual physical force.

Improper Threats

Coercive statements or actions that are unethical, illegal, or otherwise inappropriate, especially to gain an advantage in a negotiation or transaction.

False Representation

The act of deliberately presenting false information or misrepresenting facts, typically with the intent to deceive or mislead.

McJobs

Low-paying, low-skilled jobs with poor working conditions and little prospect of advancement, often seen in the fast-food industry and other service sector businesses.