Explanation
Security A 'dominates' security B, ie it offers the most return per unit of volatility. However, because it is less volatile, its returns are likely to be more concentrated around its mean compared to Security B which will have
'fatter tails' compared to Security A. Therefore Security B will offer a much better chance of making the desired 25% return. Of course, this also means that Security B is much more likely to lose a lot more money than Security A. However, if the portfolio manager is only interested in maximizing his chances of making a
25% or greater return, he should select Security B. The answer can be verified using Excel's Normdist formula, and probability of exceeding 25% will be given by [=1-NORMDIST(0.25,0.1,0.1,TRUE)] for Security A and =1-NORMDIST(0.25,0.1,0.2,TRUE)] for Security B. A combined portfolio of the two will have a return of 10% and variance less than that of Security B (or at the most equal to the weighted average of the two variances, even if their correlation is 1), which means a combined portfolio will also have a lower probability of exceeding a 25% return.
This question reflects how portfolio managers may be tempted to make sub-optimum decisions for their investors by swinging for the fences by taking large bets, for example, when they have had a big drawdown and have to make it up to the high water mark levels before they earn performance fees.

Explanation
Investors have differing view of the market, which means differing view of expected returns, correlations and volatilities. Not only do they have differing views, these views change frequently as new information reveals itself. Accordingly, each investor has their own version of the efficient frontier. Once investors have determined their efficient frontiers, they will determine the extent of risk they wish to hold. If they had identical views, they would have held the same portfolio. But they do not, and if they did, there would be very little trading in the markets.
All the above statements are true except statement I which is false due to differing investor expectations.
(Re statement IV: If investors have different risk appetites, their portfolio will vary in the split between the risky and the riskfree assets. But inside the 'risky' assets bundle the proportion of the assets will be identical.
Ie, they would express their varying risk appetites by varying how much of the risky bundle and the riskfree asset they hold, but inside the risky bundle the proportion of the different risky assets will be the same.)

Explanation
The Sharpe ratio does not require investors to be risk neutral, only that for a given level of returns they prefer less risk to more risk. (Risk neutral means that investors are indifferent to the level of risk, and are only driven by a desire to maximizing expected value, regardless of risk levels.) The ability to borrow and lend any amounts of money at the risk free rate is a fundamental assumption for the rule that optimal portfolios will maximize the Sharpe ratio.
This rule also assumes that risk preferences are completely described by return and standard deviation of returns.
Therefore Choice 'd' is the correct answer as statements I and II are correct.

Explanation
The all in price would be equal to the clean price plus accrued interest. The accrued interest for the 60 days that have passed since the last coupon payment is $5 x 60/360 = $0.83. Therefore the dirty price, or the all in price, will be $98.83. (Note that the $5 is the annual 5% coupon on the $100 face.)

Explanation
The duration of a perpetuity is 1/running yield. Therefore the correct answer is 1/.05 = 20 years