A.Tammy's little sister starts visiting online chat rooms to make friends
Answer: 28%
Explanation:
First, we have to make an assumption that the initial wealth is 100, then the weight of the risk free asset will be:
= Amount invested in risk free / Initial wealth
= -100/100
= -1
The weight of the portfolio will be calculated as:
= 1 - weight of risk free asset
= 1-(-1)
= 1 + 1
= 2
Therefore, the expected return on the resulting portfolio will be:
= 2 × 16 + [(-1) × 4]
= 32 - 4
= 28
Answer: Option A is the right answer
Explanation: Evidences in most cases has shown that MACRS is all about applying convention for one and a half year on assets. So when an entities owns 35-40% of an asset in forth quarter, Mid quarter convention will be applied for only one half of the last quarter, logically one and half month in the last quarter.
