Consider a Risky Portfolio, A, with an Expected Rate of Return

question 69

Multiple Choice

Consider a risky portfolio, A, with an expected rate of return of 0.15 and a standard deviation of 0.15, that lies on a given indifference curve.Which one of the following portfolios might lie on the same indifference curve

• A)E(r) = 0.15; Standard deviation = 0.20
• B)E(r) = 0.15; Standard deviation = 0.10
• C)E(r) = 0.10; Standard deviation = 0.10
• D)E(r) = 0.20; Standard deviation = 0.15
• E)E(r) = 0.10; Standard deviation = 0.20

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Definitions:

Face Rate

The interest rate stated on the face of a bond or a loan document, which determines the interest payments that the issuer will make.

Contract Rate

This refers to the interest rate stated in a contract that determines the amount of interest owed on a loan or financial agreement.

Stated Rate

The interest rate expressed in the terms of a loan or investment agreement, not necessarily reflecting the actual yield.

Effective Rate

The effective rate is the actual interest rate on a loan or financial product, taking into account the compounding of interest, as opposed to the nominal rate.