Scenario 5.10: Hillary Can Invest Her Family Savings in Two Assets: Riskless

Multiple Choice

Scenario 5.10:
Hillary can invest her family savings in two assets: riskless Treasury bills or a risky vacation home real estate project on an Arkansas river. The expected return on Treasury bills is 4 percent with a standard deviation of zero. The expected return on the real estate project is 30 percent with a standard deviation of 40 percent.
-Refer to Scenario 5.10. If Hillary invests 30 percent of her savings in the real estate project and the remainder in Treasury bills, the expected return on her portfolio is:

A) 4 percent.
B) 11.8 percent.
C) 17 percent.
D) 22.2 percent.
E) 30 percent.