You Invest $100 in a Risky Asset with an Expected

question 40

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T-bill with a rate of return of 0.045. The slope of the capital allocation line formed with the risky asset and the risk-free asset is equal to

• A) 0.4667.
• B) 0.8000.
• C) 0.3095.
• D) 0.41667.
• E) Cannot be determined.

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Definitions:

Higher Prices

An increase in the cost of goods or services.

Tax

A compulsory monetary fee or different form of levy required from a taxpayer by a governmental body, used to finance government operations and various public costs.

Sellers

Entities or individuals that provide goods or services in exchange for payment, crucial to the operation of any market.

Tax

A compulsory financial charge imposed by a government on individuals, corporations, or goods to finance government activities and public expenditure.