Given an Optimal Risky Portfolio with Expected Return of 12

question 47

Multiple Choice

Given an optimal risky portfolio with expected return of 12%, standard deviation of 26%, and a risk free rate of 5%, what is the slope of the best feasible CAL?

• A) 0.64
• B) 0.27
• C) 0.08
• D) 0.33
• E) 0.36

Comprehend the intertemporal budget constraint and its implications for consumption over time.

Recognize how the inflation rate influences real income and consumption choices.

Understand how utility functions reflect consumer preferences for current versus future consumption.

Learn about the substitution effect and income effect of changes in interest rates on consumption patterns.

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Definitions:

Heterophilous

characterized by or involving interaction between individuals that are different in some demographic or psychological attributes.

Polymorphic

In computing, it refers to the ability of objects to process data differently based on their data type or class; in biology, it indicates the occurrence of two or more clearly different morphs or forms.

Monomorphic

Characterized by having a single shape or form, often used in the context of genes or polymorphism.

Reactance

A psychological response wherein individuals feel the need to regain freedom or control when they perceive it as being taken away.