Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets. $\begin{array}{lr} E\left(R_{p}\right) && 12.00 \% \\ \text { Standard Deviation of } P && 7.20 \% \\ \text { T-Bill rate } & &3.60 \%\\ \\ \text { Proportion of Complete Portfolio in P } & &80 \% \\ \text { Proportion of Complete Portfolio in T-Bills } && 20 \% \\ \\ \text { Composition of P: } \\ \text { Stock A } & 40.00 \% \\ \text { Stock B } & 25.00 \% \\ \text { Stock C } &\underline { 35.00 \% } \\ \text { Total } & 100.00 \% \\ \hline \end{array}$ What is the expected return on Bo's complete portfolio?

A) 10.32% B) 5.28% C) 9.62% D) 8.44% E) 7.58% A) 10.32% B) 5.28% C) 9.62% D) 8.44% E) 7.58%

Exam 6: Capital Allocation to Risky Assets

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Which of the following statements is(are) true? I) Risk-averse investors reject investments that are fair games. II. Risk-neutral investors judge risky investments only by the expected returns. III. Risk-averse investors judge investments only by their riskiness. IV. Risk-loving investors will not engage in fair games.

(Multiple Choice)

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Question 61

Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets. E 12.00\% Standard Deviation of P 7.20\% T-Bill rate 3.60\% Proportion of Complete Portfolio in P 80\% Proportion of Complete Portfolio in T-Bills 20\% Composition of P: Stock A 40.00\% Stock B 25.00\% Stock C Total 100.00\% What is the expected return on Bo's complete portfolio?

(Multiple Choice)

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Question 62

You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T-bill with a rate of return of 0.045. The slope of the capital allocation line formed with the risky asset and the risk-free asset is equal to

(Multiple Choice)

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Question 63

You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate Of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. If you want to form a portfolio with an expected rate of return of 0.11, what percentages of your money must You invest in the T-bill and P, respectively?

(Multiple Choice)

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Question 64

Which of the following statements regarding risk-averse investors is true?

(Multiple Choice)

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Question 65

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You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T-bill with a rate of return of 0.045. The slope of the capital allocation line formed with the risky asset and the risk-free asset is equal to

Which of the following statements regarding risk-averse investors is true?

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

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