Stu Has Decided to Invest $6,800 in a Risky Asset

question 73

Multiple Choice

Stu has decided to invest $6,800 in a risky asset that has an expected return of 11.3 percent and a standard deviation of 21.2 percent.He will also invest $3,200 in a risk-free asset with an expected return of 4.2 percent.The market risk premium is 7.1 percent.What is the standard deviation of his portfolio?

• A)3.30 percent
• B)11.94 percent
• C)6.87 percent
• D)9.25 percent
• E)14.42 percent

---

Definitions:

Electroconvulsive Therapy (ECT)

Form of biomedical therapy to treat severe depression in which electrodes are placed on either one or both sides of a person’s head and an electric current is passed through the electrodes that is strong enough to cause a seizure or convulsion.

Schizophrenia

A long-term mental disorder involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation.

Eye-Movement Desensitization Reprocessing

A psychotherapy treatment designed to alleviate the distress associated with traumatic memories, emphasizing rhythmic eye movements.

Post-Traumatic Stress Disorder

A mental health condition triggered by experiencing or witnessing a terrifying event, leading to symptoms such as flashbacks, nightmares, and severe anxiety.