An investor is faced with a market portfolio with an expected return of 15%, a risk free rate of 5%, and a standard deviation of market returns of 20%.

a) What combination of the market portfolio and the risk-free asset will give the investor a portfolio with an expected return of 10%?

b) What is the standard deviation of the portfolio from (a)?

c) If the investor decides he can take on a portfolio with a standard deviation of returns of 25%, what is the highest expected return he can achieve? 

Answer rating: 100% (QA)

a To determine the combination of the market portfolio and the riskfree asset that will give the investor a portfolio with an expected return of 10 we ... View the full answer