The Expected Return of Security a Is 12 Percent with a Standard

question 10

Multiple Choice

The expected return of Security A is 12 percent with a standard deviation of 15 percent.The expected return of Security B is 9 percent with a standard deviation of 10 percent.Securities A and B have a correlation of 0.4.The market return is 11 percent with a standard deviation of 13 percent and the risk-free rate is 4 percent.What is the Sharpe ratio of a portfolio if 35 percent of the portfolio is in Security A and the remainder in Security B?

• A) 0.54
• B) 0.61
• C) 0.86
• D) 1.02

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Definitions:

Developing Countries

Countries characterized by less industrialization, a lower quality of life, and typically lower scores on the Human Development Index (HDI) than those seen in developed nations.

Urban Sprawl

The spread of city development into areas outside of traditional urban centers, often characterized by low-density and car-dependent communities.

Squatter Settlement

An area of unauthorized or informal housing, often lacking basic services, created by people with nowhere else to live.

Developing Countries

States that have a lower standard of living, less developed industries, and a lower score on the Human Development Index compared to other countries.