Exhibit 6-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 81

Multiple Choice

Exhibit 6-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{c}\begin{array}{cc}\text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\\hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right) =10 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right) =8 \% \\\left(\sigma_{\mathrm{A}}\right) =6 \% & \left(\sigma_{\mathrm{B}}\right) =5 \% \\\mathrm{~W}_{\mathrm{A}}=0.3 & \mathrm{~W}_{\mathrm{B}}=0.7\end{array}\\\mathrm{COV}_{\mathrm{AB}}=0.0008\end{array}$
-Refer to Exhibit 6-4. What is the expected return of a portfolio of two risky assets if the expected return E(R_i) , standard deviation (?_i) , covariance (COV_i,j) , and asset weight (W_i) are as shown above?

• A) 8.6%
• B) 8.1%
• C) 9.3%
• D) 10.2%
• E) 11.6%

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Definitions:

Ice

Water frozen into a solid state, which can appear transparent or a more or less opaque bluish-white color, depending on the presence of impurities.

River Terraces

Step-like landforms alongside rivers, formed by the erosion of sediments and changes in water level.

River Terraces

Step-like landforms found alongside river valleys, created as a river cuts downward into its bed while leaving remnant levels of previous floodplain as terraces.

Distributaries

Branches of a river or stream that diverge from the main channel and flow separately into the sea or another body of water.