An Investor Invests 70% of Her Wealth in a Risky

question 23

Multiple Choice

An investor invests 70% of her wealth in a risky asset with an expected rate of return of 15% and a variance of 5% and she puts 30% in a Treasury bill that pays 5%.Her portfolio's expected rate of return and standard deviation are __________ and __________ respectively.

• A) 10.0%, 6.7%
• B) 12.0%, 22.4%
• C) 12.0%, 15.7%
• D) 10.0%, 35.0%

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Definitions:

Large Number

A numeric value that is significantly larger than those found in everyday experiences, often requiring special mathematical concepts to understand and manipulate.

Gathering Information

The process of collecting data, facts, and insights from various sources to inform decisions, understand contexts, or solve problems.

Defining Problems

The process of identifying issues or obstacles that prevent achieving a desired outcome or goal.

Generating Alternatives

The process of developing multiple options or approaches to solve a problem or make a decision.