The Risk-Free Rate Is 5

question 16

Multiple Choice

The risk-free rate is 5.25 percent.The expected return on the market is 12 percent with a standard deviation of 18 percent.What is the standard deviation of an efficient portfolio with a 16 percent expected return?

• A) 7.33%
• B) 10.12%
• C) 19.11%
• D) 28.67%

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Definitions:

Equilibrium GDP

The level of Gross Domestic Product at which the total quantity of goods and services produced equals the total quantity of goods and services purchased.

Deflationary Gap

A condition in which aggregate demand is lower than the aggregate supply potentially leading to deflation.

Full Employment GDP

The total value of all goods and services produced when the economy is operating at full employment, with no cyclical unemployment.

Federal Budget Deficit

The financial situation that occurs when a government spends more money than it receives in revenue, typically measured over a fiscal year.