Suppose David Can Borrow and Lend at the Risk-Free Rate

question 62

Multiple Choice

Suppose David can borrow and lend at the risk-free rate of 5%.Which of the following three risky portfolios should he hold in combination with a position in the risk-free asset?

• A) portfolio with a standard deviation of 16% and an expected return of 12%
• B) portfolio with a standard deviation of 20% and an expected return of 16%
• C) portfolio with a standard deviation of 30% and an expected return of 20%
• D) he should be indifferent in holding any of the three portfolios

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Definitions:

Support group

A group of people with common experiences or concerns who provide each other with encouragement, comfort, and advice.

Prevalence

The proportion of a particular population found to be affected by a specific condition at a given time.

Etiology

The study of the causes or origins of diseases or disorders.

Concordance

In genetics, the occurrence of the same trait or medical condition in both members of a pair of twins or in multiple members of a family, indicating genetic influence.