An Investor Has Invested $8,000 in Security X with an Expected

question 23

Multiple Choice

An investor has invested $8,000 in Security X with an expected rate of return of 14%; $10,000 in Security Y with an expected rate of 9%; and $2,000 in a risk free asset with a return of 4%. For the portfolio, her expected rate of return is

• A) 10.5%.
• B) 9.7%.
• C) 11.4%.
• D) 12.6%.

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Definitions:

Negotiable Instruments

Financial instruments that guarantee the payment of a specified amount of money, either on demand or at a set time, with the feature of being transferable from one party to another.

Certificates of Deposit

A financial product typically offered by banks that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period.

Drafts

Preliminary versions of documents or plans that are subject to revision or editing before the final version is produced.

Negotiability

The ability of a document or instrument to be legally and freely transferred from one party to another.