You Invest $100 in a Risky Asset with an Expected

question 71

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.
-A portfolio that has an expected outcome of $114 is formed by

• A)Investing $100 in the risky asset.
• B)Investing $80 in the risky asset and $20 in the risk-free asset.
• C)Borrowing $46 at the risk-free rate and investing the total amount ($146) in the risky asset.
• D)Investing $43 in the risky asset and $57 in the riskless asset.
• E)Such a portfolio cannot be formed.

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