Question
Consider a Treasury bill with a rate of return of 5% and the following risky securities: Security A: E ( r ) = .15; variance
Consider a Treasury bill with a rate of return of 5% and the following risky securities:
Security A:E(r) = .15; variance = .0400
Security B:E(r) = .14; variance = .0225
Security C:E(r) = .15; variance = .1000
Security D:E(r) = .16; variance = .0625
The investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above. The security the investor should choose as part of her complete portfolio to achieve the best CAL would be ________.
Select one:
a.security A
b.security B
c.security C
d.security D
I can't seem to figure out, somethings not matching for me.
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