Suppose That Fenner Smith of Workouts Must Divide His Portfolio

question 12

Multiple Choice

Suppose that Fenner Smith of Workouts must divide his portfolio between two assets, one of which gives him an expected rate of return of 15% with zero standard deviation and one of which gives him an expected rate of return of 30% and has a standard deviation of 5%.He can alter the expected rate of return and the variance of his portfolio by changing the proportions in which he holds the two assets.If we draw a "budget line" with expected return on the vertical axis and standard deviation on the horizontal axis, depicting the combinations that Smith can obtain, the slope of this budget line is

• A)3.
• B)-3.
• C)1.50.
• D)-1.50.
• E)4.50.

---

Definitions:

Foreseen

Anticipated or predicted as likely to happen in the future.

Rattlesnake

A venomous snake known for the distinctive rattle at the end of its tail, which it shakes as a warning signal to potential predators or threats.

Liability

Legal responsibility for one's actions or omissions, which may result in damages or legal penalties.

Aquarium

A tank or pool designed to hold aquatic plants and animals in controlled conditions for research, education, or display.