You Invest $100 in a Risky Asset with an Expected

question 39

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:

Reality Shock

The feeling of surprise and disorientation experienced when entering a new environment, revealing a gap between expectations and reality.

Institutionalized Socialization Tactics

Organized methods used within institutions or organizations to assimilate new members into the prevailing culture or set of norms.

Self-selection

The process where individuals voluntarily choose to participate in a particular group, activity, or study based on their personal characteristics or preferences.

Selection Process

The procedure of choosing the most suitable candidates for a job or a role based on predefined criteria.