You Have Been Hired as a Portfolio Manager for a Stock

question 3

Multiple Choice

You have been hired as a portfolio manager for a stock brokerage.Your first job is to invest $100,000 in a portfolio of two assets.The first asset is a safe asset with a sure return of 4% interest.The second asset is a risky asset with a 26% expected rate of return, but the standard deviation of this return is 10%.Your client wants a portfolio with as high a rate of return as possible consistent with a standard deviation no larger than 4%.How much of her money do you invest in the safe asset?

• A)$22,000
• B)$40,000
• C)$64,000
• D)$36,000
• E)$60,000

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