The Expected Return on the Market Is 12

question 98

Multiple Choice

The expected return on the market is 12.5 percent with a standard deviation of 25 percent.The risk-free rate is 5.5 percent.What is the expected return on an efficient portfolio with a standard deviation of 30 percent?

• A) 4.10%
• B) 11.33%
• C) 13.90%
• D) 28.90%

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Definitions:

Proximity

A principle of perception that elements close to each other tend to be perceived as a group.

Similarity

The state or fact of being alike; often used to describe how alike two or more objects, ideas, or concepts are.

Closure

The psychological term for seeking a sense of resolution or completion.

Binocular Disparity

The difference in the images received by the two eyes as a result of their horizontal separation, which is used for depth perception.