Exhibit 6-7
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 34

Multiple Choice

Exhibit 6-7
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{c}\begin{array}{cc}\text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\\hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right) =7 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right) =9 \% \\\left(\sigma_{\mathrm{A}}\right) =6 \% & \left(\sigma_{\mathrm{B}}\right) =5 \% \\\mathrm{~W}_{\mathrm{A}}=0.6 & \mathrm{~W}_{\mathrm{B}}=0.4\end{array}\\\mathrm{COV}_{\mathrm{AB}}=0.0014\end{array}$
-Refer to Exhibit 6-7. 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) 5.8%
• B) 6.1%
• C) 6.9%
• D) 7.8%
• E) 8.9%

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Definitions:

Efficiency Wages

The theory that employers may pay wages above the market rate to increase worker productivity, reduce turnover, and encourage loyalty.

Employee Turnover

The rate at which employees leave a workforce and are replaced by new employees.

Job Specification

A job specification focuses on the individual who will perform the job and indicates the knowledge, abilities, skills, and other characteristics that an individual must have to be able to perform the job.

Job Enrichment

A method to motivate employees by giving them more responsibilities and variety in their tasks, leading to increased satisfaction.