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West Coast Investing (WCI) is building a portfolio from three investments: 1, 2, and 3. WCI has 8 years of annual return data to work from. The goal for WCI is to determine the optimal portfolio for their client. Year 1 2345 6 7 8 Invest 1 9.9% 8.9% 8.1% 2.0% 3.0% 7.1% 5.3% 10.4% Invest 2 8.7% 17.4% 19.4% -7.0% 11.4% -2.3% 17.4% 23.0% Invest 3 5.0% 12.9% 5.1% 17.0% 5.9% 11.5% -1.2% 12.5% Suppose that WCI seeks a portfolio that maximizes the expected portfolio return subject to requiring the portfolio's risk (standard deviation) to be less than or equal to 3.00%. Which of the following statements are true? Note: Numerical answers are rounded to 2 significant digits. O Exactly two of the answers are correct. The risk constraint is binding at the optimal solution. The percentage invested in Investment 2 is less than 14.00% O The percentage invested in Investment 1 is less than 40.00% The expected portfolio return is below 8.00%

West Coast Investing (WCI) is building a portfolio from three investments: 1, 2, and 3. WCI has 8 years of annual return data to work from. The goal for WCI is to determine the optimal portfolio for their client. Year 1 2345 6 7 8 Invest 1 9.9% 8.9% 8.1% 2.0% 3.0% 7.1% 5.3% 10.4% Invest 2 8.7% 17.4% 19.4% -7.0% 11.4% -2.3% 17.4% 23.0% Invest 3 5.0% 12.9% 5.1% 17.0% 5.9% 11.5% -1.2% 12.5% Suppose that WCI seeks a portfolio that maximizes the expected portfolio return subject to requiring the portfolio's risk (standard deviation) to be less than or equal to 3.00%. Which of the following statements are true? Note: Numerical answers are rounded to 2 significant digits. O Exactly two of the answers are correct. The risk constraint is binding at the optimal solution. The percentage invested in Investment 2 is less than 14.00% O The percentage invested in Investment 1 is less than 40.00% The expected portfolio return is below 8.00%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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West Coast Investing (WCI) is building a portfolio from three investments: 1, 2, and 3. WCI has 8 years of annual return data to work from. The goal for WCI is to determine the optimal portfolio for their client. Year 1 2 3 4 5 6 7 8 Invest 1 9.9% 8.9% 8.1% 2.0% 3.0% 7.1% 5.3% 10.4% Invest 2 8.7% 17.4% 19.4% -7.0% 11.4% -2.3% 17.4% 23.0% Invest 3 5.0% 12.9% 5.1% 17.0% 5.9% 11.5% -1.2% 12.5% Suppose that WCI seeks a portfolio that maximizes the expected portfolio return subject to requiring the portfolio's risk (standard deviation) to be less than or equal to 3.00%. Which of the following statements are true? Note: Numerical answers are rounded to 2 significant digits. Exactly two of the answers are correct. The risk constraint is binding at the optimal solution. The percentage invested in Investment 2 is less than 14.00% The percentage invested in Investment 1 is less than 40.00% The expected portfolio return is below 8.00%
Transcribed Image Text:West Coast Investing (WCI) is building a portfolio from three investments: 1, 2, and 3. WCI has 8 years of annual return data to work from. The goal for WCI is to determine the optimal portfolio for their client. Year 1 2 3 4 5 6 7 8 Invest 1 9.9% 8.9% 8.1% 2.0% 3.0% 7.1% 5.3% 10.4% Invest 2 8.7% 17.4% 19.4% -7.0% 11.4% -2.3% 17.4% 23.0% Invest 3 5.0% 12.9% 5.1% 17.0% 5.9% 11.5% -1.2% 12.5% Suppose that WCI seeks a portfolio that maximizes the expected portfolio return subject to requiring the portfolio's risk (standard deviation) to be less than or equal to 3.00%. Which of the following statements are true? Note: Numerical answers are rounded to 2 significant digits. Exactly two of the answers are correct. The risk constraint is binding at the optimal solution. The percentage invested in Investment 2 is less than 14.00% The percentage invested in Investment 1 is less than 40.00% The expected portfolio return is below 8.00%
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