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:

Association

An organized group of people who share a common interest, purpose, or goal, coming together to implement a wide range of activities.

Causation

The relationship between cause and effect, where one event (the cause) directly results in another event (the effect).

Normative Analysis

An approach in economics that involves value judgments or opinions about what the economy should be like or what particular policy actions should be recommended.

Macroeconomics

A branch of economics that deals with performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.