Exhibit 6-10
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 67

Multiple Choice

Exhibit 6-10
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{c}\begin{array}{cc}\text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\\hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right) =16 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right) =14 \% \\\left(\sigma_{\mathrm{A}}\right) =3 \% & \left(\sigma_{\mathrm{B}}\right) =8 \% \\\mathrm{~W}_{\mathrm{A}}=0.5 & \mathrm{~W}_{\mathrm{B}}=0.5\end{array}\\\mathrm{COV}_{\mathrm{A,B}}=0.0014\end{array}$
-Refer to Exhibit 6-10. 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) 11%
• B) 12%
• C) 13%
• D) 14%
• E) 15%

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Definitions:

Indifference Curves

A graph showing different bundles of goods between which a consumer is indifferent, illustrating preferences and trade-offs.

Market Prices

The current price at which a good or service can be bought or sold in a marketplace, determined by supply and demand dynamics.

Income Source

The origin or means through which an individual, company, or entity earns money.

Utility Function

An expression that captures how a consumer ranks different bundles of goods based on the level of utility or satisfaction each bundle provides.