You Invest $100 in a Risky Asset with an Expected

question 36

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05.What percentages of your money must be invested in the risky asset and the risk-free asset,respectively,to form a portfolio with an expected return of 0.09?

• A) 85% and 15%
• B) 75% and 25%
• C) 67% and 33%
• D) 57% and 43%
• E) cannot be determined

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Definitions:

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A prolonged conflict from the 1950s to the 1970s between communist forces in North Vietnam and the government of South Vietnam, heavily involving the United States and other allies.

Students for a Democratic Society

An activist student organization in the United States, prominent in the 1960s for its role in the civil rights, anti-Vietnam War, and student rights movements.