Asked by
Arshad Naleer
on Oct 14, 2024
Verified
Suppose that Ms.Lynch can make up her portfolio using a risk-free asset that offers a surefire rate of return of 10% and a risky asset with an expected rate of return of 15%, with standard deviation 5.If she chooses a portfolio with an expected rate of return of 15%, then the standard deviation of her return on this portfolio will be
A) 2.50%.
B) 8%.
C) 5%.
D) 10%.
E) None of the above.
Risk-Free Asset
An investment that provides a guaranteed return with no chance of loss.
Expected Rate
The expected rate often refers to the anticipated return on an investment over a specific period, factoring in all known information and risks.
Standard Deviation
A measure of the dispersion or spread of data points in a data set, indicating how much variation exists from the average.
- Assess the impact of incorporating risk-free and risky assets on a portfolio's risk and return dynamics.
- Ascertain the mathematical formulas involved in measuring the standard deviation of a portfolio's return.
Verified Answer
CJ
Learning Objectives
- Assess the impact of incorporating risk-free and risky assets on a portfolio's risk and return dynamics.
- Ascertain the mathematical formulas involved in measuring the standard deviation of a portfolio's return.