Consider a T-Bill with a Rate of Return of 5

question 21

Multiple Choice

Consider a T-bill with a rate of return of 5 percent and the following risky securities: Security A: E(r) = 0.15; Variance = 0.04
Security B: E(r) = 0.10; Variance = 0.0225
Security C: E(r) = 0.12; Variance = 0.01
Security D: E(r) = 0.13; Variance = 0.0625
From which set of portfolios,formed with the T-bill and any one of the 4 risky securities,would a risk-averse investor always choose his portfolio?

• A)The set of portfolios formed with the T-bill and security A.
• B)The set of portfolios formed with the T-bill and security B.
• C)The set of portfolios formed with the T-bill and security C.
• D)The set of portfolios formed with the T-bill and security D.
• E)Cannot be determined.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.