$\text { Investment }$ $\quad$ $\quad$

question 4

Multiple Choice

$\text { Investment }$ $\quad$$\quad$$\quad$$\quad$$\text { A }$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { B }$
\begin{array}{|l|l|l|l|l|}\hline\\begin{array}{l}\text { State } \\\text { description }\end{array} & \text { Bad state } & \text { Good state } & \text { Bad state } & \text { Good state } \\\hline \text { Probability } & 0.5 & 0.5 & 0.5 & 0.5 \\\hline \text { Payoff } & 200 & 220 & 400 & 435 \\\hline\end{array}
-The share market is currently returning 14% p.a. ,while the risk-free asset return is 6%.If an investor wishes to earn a return of 10%,what weight should the investor hold in the risk-free asset?

• A) \( 0.400 \)
• B) \( 0.500 \)
• C) \( 0.600 \)
• D) \( 0.667 \)

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Definitions:

Stockholders' Equity

The portion of a company's assets that belongs to the shareholders, calculated as total assets minus total liabilities.

Net Assets

The difference between total assets and total liabilities, representing the owner's equity in a company.

Residual Interest

The remaining interest in assets after all other claims have been satisfied, often related to securitization transactions.