You Invest $1,000 in a Complete Portfolio

question 22

Multiple Choice

You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 16% and a standard deviation of 20% and a treasury bill with a rate of return of 6%.
-A portfolio that has an expected value in one year of $1,100 could be formed if you _________.

• A) Place 40% of your money in the risky portfolio and the rest in the risk free asset
• B) Place 55% of your money in the risky portfolio and the rest in the risk free asset
• C) Place 60% of your money in the risky portfolio and the rest in the risk free asset
• D) Place 75% of your money in the risky portfolio and the rest in the risk free asset

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Definitions:

Sales Returns and Allowances

Reductions in sales revenue for returned goods or for allowances given to customers for defective or unsatisfactory merchandise.

Gross Profit

The difference between the revenue a company earns from selling goods or services and the cost of goods sold.

Financial Statements

Reports that provide an overview of a company's financial condition, including the balance sheet, income statement, and statement of cash flows.

Cash Discount

A deduction from the stated price of goods or services offered to buyers as an incentive for early payment.