An Investor Invests 70% of His Wealth in a Risky

question 36

Multiple Choice

An investor invests 70% of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 30% in a T-bill that pays 5%.His portfolio's expected return and standard deviation are __________ and __________, respectively.

• A)0.120; 0.14
• B)0.087; 0.06
• C)0.295; 0.12
• D)0.087; 0.12

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Definitions:

Form 1120S

A tax document used in the United States to report the earnings, losses, and dividends of S corporation shareholders.

Corporation

A legal entity that is separate and distinct from its owners. Corporations can own property, incur debts, sue, and be sued.

Permanent Accounts

Accounts in the general ledger that are not closed at the end of the accounting year, such as assets, liabilities, and equity accounts.

Temporary Accounts

Accounts used to track transactions within a specific accounting period, closed out at the end of the period, such as revenues, expenses, and dividends.