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

question 94

Multiple Choice

The expected return on the market is 12 percent with a standard deviation of 20 percent and the risk-free rate is 4 percent.Which of the following portfolios are correctly priced?

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

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Definitions:

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts.

Startup Failure

The condition where a startup company cannot continue operations due to financial constraints, lack of market fit, management problems, or other reasons leading to its closure or insolvency.

Global Entrepreneurship Monitor

An annual assessment of the national level of entrepreneurial activity around the world, initiated as a partnership between London Business School and Babson College.

Type of Economy

A category that describes a country's economic system, such as a capitalist, socialist, or mixed economy.