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:

Negotiations

The process of discussion aimed at reaching an agreement or compromise between two or more parties.

Offeree's Silence

A legal concept where the silence of the party to whom an offer is made does not generally constitute acceptance of the offer.

Acceptance

The act of agreeing to the terms of an offer, thus completing the process of making a contract binding.

Negotiations

The process of discussing terms andconditions in order to reach a mutual agreement or compromise.