Exhibit 715
Use the Information Below for the Following Problem(S)

question 80

Multiple Choice

Exhibit 7.15
Use the Information Below for the Following Problem(S)
$\begin{array}{cc}\text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\\hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right) =14 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right) =16 \% \\\left(\sigma_{\mathrm{A}}\right) =13 \% & \left(\sigma_{\mathrm{B}}\right) =18 \% \\\mathrm{~W}_{\mathrm{A}}=0.4 & \mathrm{~W}_{\mathrm{B}}=0.6\end{array}$
                $\mathrm{COV}_{\mathrm{AB}}=0.0024$

-Refer to Exhibit 7.15.What is the expected return of a portfolio of two risky assets if the expected return E(R?) ,standard deviation (s?) ,covariance (COV?,?) ,and asset weight (W?) are as shown above?

• A) 13.8%
• B) 14.6%
• C) 15.0%
• D) 15.2%
• E) 16.8%

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Definitions:

Depreciation Expense

The charged amount representing the usage of fixed assets attributed to business operations over a period.

Incremental Expenses

Incremental expenses are the additional costs incurred when a company increases its production or activities beyond its current levels.

Payback Method

A financial analysis tool used to determine the time required to recover the cost of an investment.

Future Cash Flows

Estimated future financial transactions that involve the inflow or outflow of money over a period of time.