The Expected Return on the Market Portfolio Is 13 Percent

question 1

Multiple Choice

The expected return on the market portfolio is 13 percent with a standard deviation of 16 percent.What are the expected return and standard deviation for a portfolio with 40 percent of the investment in the market portfolio borrowed at the risk-free rate of 5 percent?

• A) Expected return = 26.67%; expected return = 18.33%
• B) Expected return = 18.33%; standard deviation = 26.67%
• C) Expected return = 22.40%; standard deviation = 16.20%
• D) Expected return = 16.20%; standard deviation = 22.40%

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