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.

What would be the dollar value of your positions in X, Y, and the T-bills, respectively, if you decide to hold a portfolio that has an expected outcome of \$1,120?

A. 0.087; 0.06

B. 0.087; 0.12

C. 0.114; 0.12

D. 0.795; 0.14

E. 0.295; 0.12

A. the security's variance.

B. minimum required utility of the portfolio.

C. investor's return requirement.

D. investor's aversion to risk.

E. certainty-equivalent rate of the portfolio

A. an investor's risk tolerance is decreasing.

B. borrowing rate exceeding lending rate.

C. increase in the portfolio proportion of the risk-free asset.

D. reward-to-volatility ratio increasing.

E. a flawed theory

A. maximizes her expected utility.

B. maximizes her expected profit.

C. minimizes both her risk and return.

D. minimizes her risk.

E. maximizes her risk

A. They only accept risky investments that offer risk premiums over the risk- free rate.

B. They only care about the rate of return and accept investments that are fair games.

C. They only care about the rate of return.

D. They accept investments that are fair games.

E. They are willing to accept lower returns and high risk.

A. I and II only

B. II, III, and IV only

C. II and III only

D. I only

E. II only

A. A portfolio that pays 10 percent with 40 percent probability or 5 percent with a 60 percent probability.

B. A portfolio that pays 12 percent with 20 percent probability or 2 percent with 80 percent probability.

C. A portfolio that pays 10 percent with a 60 percent probability or 5 percent with 40 percent probability.

D. A portfolio that pays 12 percent with 60 percent probability or 5 percent with 40 percent probability.

E. A portfolio that pays 12 percent with 40 percent probability or 5 percent with 60 percent probability.