Consider a Treasury Bill with a Rate of Return of 5

question 8

Multiple Choice

Consider a treasury bill with a rate of return of 5% and the following risky securities:
Security A: E(r) = .15; variance = .0400
Security B: E(r) = .10; variance = .0225
Security C: E(r) = .12; variance = .1000
Security D: E(r) = .13; variance = .0625
The investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above.The security the investor should choose as part of his complete portfolio to achieve the best CAL would be _________.

• A) security A
• B) security B
• C) security C
• D) security D

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Definitions:

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Machines for cleaning dishes and utensils automatically.

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The act of using up a resource or goods, rendering them unable to be used again or necessitating their replacement.

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The exchange of goods and services between countries.