An investor intends to construct a portfolio using only U.S. T-bills and an index fund similar to the S&P 500. The T-bills have a return of 5%. The S&P 500 has a standard deviation of 25% and an expected return of 20%.

1- Draw the CML and mark the points when the investment in the market is 0% (Point A); 100% (Point B); and 150% (Point C).

2- Determine the exact risk and return at each point.

Answer rating: 100% (QA)

Table A B 1 T bill rate 5 20 25 2 SP return 3 S P risk 5 ... View the full answer