Suppose That Ms

question 6

Multiple Choice

Suppose that Ms.Lynch can make up her portfolio using a risk-free asset that offers a surefire rate of return of 10% and a risky asset with an expected rate of return of 20%, with standard deviation 5.If she chooses a portfolio with an expected rate of return of 17.50%, then the standard deviation of her return on this portfolio will be

• A)3.75%.
• B)7.50%.
• C)6.75%.
• D)1.88%.
• E)None of the above.

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Definitions:

Limited Liability

A legal structure that limits the financial liability of company owners to the amount they invested, protecting personal assets from business debts.

Shareholder Control

The power exercised by shareholders to influence a company’s decisions, often through voting rights associated with share ownership.

Stock Exchange

A marketplace where securities, such as stocks and bonds, are bought and sold, facilitating the trade between buyers and sellers.

Public Corporation

A company that has issued securities through an initial public offering (IPO) and is traded on at least one stock exchange or in the over-the-counter market.