Exhibit 6-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 21

Multiple Choice

Exhibit 6-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{c}\begin{array}{cc}\text { Asset (A) } & \text { Asset (B) } \\\hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right) =25 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right) =15 \% \\\left(\sigma_{\mathrm{A}}\right) =18 \% & \left(\sigma_{\mathrm{B}}\right) =11 \% \\\mathrm{~W}_{\mathrm{A}}=0.75 & \mathrm{~W}_{\mathrm{B}}=0.25\\\end{array}\\\mathrm{COV}_{\mathrm{ABB}}=-0.0009\end{array}$
-Refer to Exhibit 6-2. 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) 18.64%
• B) 20.0%
• C) 22.5%
• D) 13.65%
• E) 11%

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Definitions:

Months

Units of time roughly based on the period of the lunar cycle, used in the Gregorian calendar to divide the year into twelve periods.

Watches

Timepieces worn on the wrist, designed to keep and indicate time.

Falling Object

An item that drops under the influence of gravity, posing potential risks or dangers to those below.

Months

Units of time, typically lasting 28 to 31 days, used to divide a year into twelve periods in the Gregorian calendar.