Exhibit 7A -Refer to Exhibit 7A

question 2

Multiple Choice

Exhibit 7A.1
$$\mathrm { W } _ { 1 } = \left[ \mathrm { E } \left( \sigma _ { 2 } \right) ^ { 2 } - r _ { 1.2 } \mathrm { E } \left( \sigma _ { 1 } \right) \mathrm { E } \left( \sigma _ { 2 } \right) \right] \div \left[ \mathrm { E } \left( \sigma _ { 1 } \right) ^ { 2 } + \mathrm { E } \left( \sigma _ { 2 } \right) ^ { 2 } - 2 r _ { 1.2 } \mathrm { E } \left( \sigma _ { 1 } \right) \mathrm { E } \left( \sigma _ { 2 } \right) \right]$$
-Refer to Exhibit 7A.1.What weight of security 1 gives the minimum portfolio variance when r_1.2 = .60,E(?₁) = .10 and E(?₂) = .16?

• A) .0244
• B) .3679
• C) .5697
• D) .6309
• E) .9756

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Definitions:

Tax Purposes

Considerations or transactions carried out to comply with tax regulations or to optimize tax efficiency.

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Creditors' Protection

Legal and financial mechanisms in place to ensure that creditors can reclaim some value from a borrower in case of default, insolvency, or bankruptcy.

Present Value

The immediate value of a prospective sum of money or stream of cash flows, using a specific interest rate for calculation.