You Invest $100 in a Risky Asset with an Expected

question 18

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05.
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 0.09?

• A) 85% and 15%
• B) 75% and 25%
• C) 67% and 33%
• D) 57% and 43%
• E) Cannot be determined.

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Definitions:

Supertasters

Individuals who have a heightened sense of taste, often due to a greater number of taste buds on their tongue.

Umami

One of the five basic tastes, recognized for its savory flavor, which is attributed to the presence of glutamate and other amino acids.

Gustatory System

The sensory system responsible for the perception of taste and flavor.

Solitary Tract

A bundle of nerve fibers in the brainstem involved in transmitting sensory information, particularly from the internal organs.