The Expected Return on the Market Is 12 Percent with a Standard

question 49

Multiple Choice

The expected return on the market is 12 percent with a standard deviation of 16 percent and the risk-free rate is 4.5 percent.Which of the following portfolios are overpriced?

• A) 1 and 3 only
• B) 1 and 4 only
• C) 2 and 3 only
• D) 2 and 4 only

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Definitions:

Range Of Prices

A spectrum or interval between the lowest and highest prices at which goods or services are sold in the market.

Cups Of Soup

A measure of quantity often used in food service to represent single servings of soup.

Trade

Trade involves the exchange of goods, services, or both, between parties, which can be within an economy (domestic trade) or between economies (international trade).

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than another entity.