Question

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) = .10; variance = .0225 Security C: E( r) = .12; variance = .1000 Security D: E( r) = .13; 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 _________.

Answer 1

A:E(r) = .15; variance = .0400

Step-by-step explanation:

Slope= .15-.05 = .5000

(.04)5