You Invest $1,000 in a Risky Asset with an Expected

question 26

Multiple Choice

You invest $1,000 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 risk-free asset and the risky asset, respectively, to
Form a portfolio with a standard deviation of 0.20?

• 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:

Extensor Muscles

Muscles that work to extend or straighten a joint, opposite to flexor muscles.

Flexed

Bent or tensed, often referring to a muscle position.

Fibula

A long, thin bone located on the lateral side of the tibia in the lower leg, important for stabilizing the ankle and supporting muscles.

Ulna

A bone in the forearm that runs from the elbow to the smallest finger, and when in anatomical position, it is found on the medial side of the forearm.