You Invest $100 in a Risky Asset with an Expected

question 27

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T-bill with a rate of return of 0.03.
-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 0.08?

• A)85% and 15%
• B)75% and 25%
• C)62.5% and 37.5%
• D)57% and 43%
• E)cannot be determined

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Definitions:

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price over a specific time period.

Demand

The capacity and willingness of consumers to purchase varying quantities of a good or service at different prices throughout an established period.

Quantity Supplied

The amount of a good or service that producers are willing to sell at a given price over a specified period.

Supply

The total amount of a product or service that is available to consumers at a given price.