Investment Analysis Midterm

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
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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
0.3095
The change from a straight to a kinked capital allocation line is a result of
borrowing rate exceeding lending rate
Asset allocation may involve
the decision as to the allocation between a risk-free asset and a risky asset and the decision as to the allocation among different risky assets
In the mean-standard deviation graph, which one of the following statements is true regarding the indifference curve of a risk-averse investor?
It is the locus of portfolios that offer the same utility according to returns and standard deviations.
You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.The slope of the capital allocation line formed with the risky asset and the risk-free asset is equal to
0.325
A fair game
will not be undertaken by a risk-averse investor and is a risky investment with a zero risk premium.
You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11?
53.8% and 46.2%
When an investment advisor attempts to determine an investor's risk tolerance, which factor would they be least likely to assess?
The level of return the investor prefers
The utility score an investor assigns to a particular portfolio, other things equal,
will increase as the rate of return increases.
Assume an investor with the following utility function: U = E(r) - 3/2(s2).To maximize her expected utility, she would choose the asset with an expected rate of return of _______ and a standard deviation of ________, respectively.
10%; 10%