You are a portfolio manager for a wealth management fund. Your client asks you to construct...

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You are a portfolio manager for a wealth management fund. Your client asks you to construct an optimal portfolio that will achieve an expected return of E(rp) = 6%. As a portfolio manager you have three investment options: i. ii. iii. The risk-free asset provides a return of rf = 2%. The Market Portfolio (e.g., Maximum Sharpe Ratio Portfolio) has expected return of E(rm) = 12% and risk of V(rm) = 9% and SD (rm) = 30%. The Minimum Variance Portfolio has expected return of E (mv) = 8% and risk of V (mv) = 4% and SD (mv) = 20%. To achieve your optimal CAL portfolio, how would you allocate (weight) your investment dollars across the options above to achieve the lowest risk portfolio with an expected return of E (rp) = 6%? E.g., what is the weight of your investment in each option? Part a) b) c) Asset Risk-Free Market Portfolio Min Variance Portfolio Weight You are a portfolio manager for a wealth management fund. Your client asks you to construct an optimal portfolio that will achieve an expected return of E(rp) = 6%. As a portfolio manager you have three investment options: i. ii. iii. The risk-free asset provides a return of rf = 2%. The Market Portfolio (e.g., Maximum Sharpe Ratio Portfolio) has expected return of E(rm) = 12% and risk of V(rm) = 9% and SD (rm) = 30%. The Minimum Variance Portfolio has expected return of E (mv) = 8% and risk of V (mv) = 4% and SD (mv) = 20%. To achieve your optimal CAL portfolio, how would you allocate (weight) your investment dollars across the options above to achieve the lowest risk portfolio with an expected return of E (rp) = 6%? E.g., what is the weight of your investment in each option? Part a) b) c) Asset Risk-Free Market Portfolio Min Variance Portfolio Weight

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To construct an optimal portfolio with the lowest risk and an expected return of 6 we can use the Ca... View the full answer