You Invest $100 in a Risky Asset with an Expected

question 42

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 risk-free asset and the risky asset,respectively,to form a portfolio with a standard deviation of 0.08?

• A)30% and 70%
• B)50% and 50%
• C)60% and 40%
• D)40% and 60%
• E)Cannot be determined.

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Definitions:

Direct Labor Rate

The cost of wages paid to workers directly involved in the production of goods or services, often used in job costing.

Materials Markup

A pricing method where a percentage is added to the cost of materials to cover overhead and profit.

Markup Percentage

A measure of how much the price of a product or service is increased over its cost to the seller, expressed as a percentage of the cost.

Variable Product Cost

Expenses that fluctuate in direct proportion to the amount of output produced, including direct labor and raw materials.