The Risk-Free Portfolio That Can Be Formed with the Two

question 44

Multiple Choice

The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.

• A)8.5%
• B)9.0%
• C)8.9%
• D)9.9%
• E)none of the above

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Definitions:

Fair Return

A profit level that allows a business to maintain its operations and justify the risk of investment, often considered in regulatory contexts.

Regulatory Commission

A government body responsible for setting and enforcing rules and regulations in a specific sector to protect public interest.

Economies of Scale

The advantages in cost that companies receive owing to their operational magnitude, with the expense per produced unit generally diminishing as the scale of operations broadens.

Natural Monopoly

A market condition where the cost of production is minimized by having a single firm produce the product, due to high fixed or startup costs.