You Invest $1000 in a Risky Asset with an Expected

question 15

Multiple Choice

You invest $1000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.
-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 0.11?

• A)53.8% and 46.2%
• B)75% and 25%
• C)62.5% and 37.5%
• D)46.2% and 53.8%
• E)Cannot be determined.

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Definitions:

Familywise Error

The familywise error rate is the probability of making one or more false discoveries, or Type I errors, when performing multiple hypotheses tests.

Type I Error

A statistical error occurring when one incorrectly rejects a true null hypothesis, also known as a false positive.

Probability

A measure of the likelihood or chance that a particular event will occur.

Familywise Error

The probability of making one or more false discoveries, or Type I errors when performing multiple hypotheses tests.