Assume the CAPM Is the Correct Asset Pricing Model,and the Risk-Free

question 12

Multiple Choice

Assume the CAPM is the correct asset pricing model,and the risk-free rate of return is 6% and the market has an expected return and a standard deviation of 16% and 0.10%,respectively.An investor has a portfolio consisting of equal amounts in assets A and B.Asset A has an expected return of 8%.If the portfolio has an expected return of 10%,what is the covariance between asset B and the market portfolio?

• A) \( 2.000 \)
• B) \( 3.000 \)
• C) \( 6.000 \)
• D)\( 7.000 \)

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Definitions:

Dorsal Gluteal

Referring to the upper portion of the buttocks, a site for intramuscular injections.

Deltoid

A large, triangular muscle covering the shoulder joint that is responsible for lifting the arm and giving the shoulder its range of motion.

Aspiration

The act of drawing in or out using a sucking motion, especially the inhalation of foreign objects into the respiratory tract.

Stronger Side

Refers to the more dominant or physically powerful side of a person's body, often developed through natural preference or training.