1. (6 points) Assume a risk-free rate of 1.5%. Answer the questions below using the information...

 

 

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1. (6 points) Assume a risk-free rate of 1.5%. Answer the questions below using the information in the following table: Table 1: default Portfolio A B C D E F Expected Return 3.2% 8.1% 9.8% 5.1% 10.7% 4.8% Standard Deviation 2.7% 9.9% 13.7% 6.2% 17% 6.1% (a) Among the portfolios in the table, which one is closest to the market portfolio? Justify your answer. (b) Plot the capital market line (CML) based on your answer in part (a). (c) For portfolio C, what is the portfolio risk premium per unit of portfolio risk? (d) Suppose we are willing to make an investment only with = 6.2%. Is a return of 6.5% a realistic expectation for us? 1. (6 points) Assume a risk-free rate of 1.5%. Answer the questions below using the information in the following table: Table 1: default Portfolio A B C D E F Expected Return 3.2% 8.1% 9.8% 5.1% 10.7% 4.8% Standard Deviation 2.7% 9.9% 13.7% 6.2% 17% 6.1% (a) Among the portfolios in the table, which one is closest to the market portfolio? Justify your answer. (b) Plot the capital market line (CML) based on your answer in part (a). (c) For portfolio C, what is the portfolio risk premium per unit of portfolio risk? (d) Suppose we are willing to make an investment only with = 6.2%. Is a return of 6.5% a realistic expectation for us?