A Margin User Has a Situation Where the Riskfree Rate

question 37

Multiple Choice

A margin user has a situation where the riskfree rate is 3% and the risky portfolio has an expected return of 15% with a standard deviation of 8%. If the proportion in the riskfree asset is -.9, the standard deviation of the portfolio would be

• A) 15.2%.
• B) 8.8%.
• C) 12.2%.
• D) 7.2%.

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Definitions:

Net Income

The amount of revenue left over after deducting all expenses, taxes, and costs from total revenue.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials and labor.

Contra-Asset

An account on a company's balance sheet that reduces the value of an asset, often used for accumulated depreciation.

Current Asset

Any asset that is expected to be converted into cash within one year or within the normal operating cycle of a business.