Equity markets 9 - Chapter 7 Capital Allocation Between the...

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E ( R p ) 1 2 . 0 0 % S t a n d a r d D e v i a t i o n o f P 7 . 2 0 % T - B i l l r a t e 3 . 6 0 % P r o p o r t i o n o f C o m p l e t e P o r t f o l i o i n P 8 0 % P r o p o r t i o n o f C o m p l e t e P o r t f o l i o i n T - B i l l s 2 0 % C o m p o s i t i o n o f P : S t o c k A 4 0 . 0 0 % S t o c k B 2 5 . 0 0 % S t o c k C 3 5 . 0 0 % T o t a l 1 0 0 . 0 0 % Chapter 7 Capital Allocation Between the Risky Asset and the Risk-Free Asset 24. When wealth is shifted from the risky portfolio to the risk-free asset, what happens to the relative proportions of the various risky assets within the risky portfolio? A) They all decrease. B) Some increase and some decrease. C) They all increase. D) They are not changed. E) The answer depends on the specific circumstances. Answer: D Difficulty: Moderate Rationale: A shift in the proportion of the investor's portfolio that is held in the risky
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Equity markets 9 - Chapter 7 Capital Allocation Between the...

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