Use the Following Information to Answer the Question(s)below

question 45

Multiple Choice

Use the following information to answer the question(s) below.
Assume that the economy has three types of people.20% are fad followers,75% are passive investors,and 5% are informed traders.The portfolio consisting of all informed traders has a beta of 1.4 and an expected return of 16%.The market has an expected return of 10% and the risk-free rate is 4%.
-The expected return for the fad follower's portfolio is closest to:

• A)11.5%.
• B)12.4%.
• C)13.6%.
• D)16.0%.

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Definitions:

Behavior Modification Technique

Approaches used to change detrimental behaviors into more positive actions through reinforcement and other strategies.

Intrinsic Motivation

The drive to perform an activity for its inherent satisfaction rather than for some separable consequence.

Systematic Desensitization

A behavioral therapy technique used to reduce phobias and anxiety through gradual exposure to the feared object or situation combined with relaxation exercises.

Positive Reinforcement

A term from reinforcement theory, positive reinforcement refers to the situation in which a behavior is followed by positive consequences and thus is likely to be repeated.