From a portfolio perspective, explain the normal distribution and its two moments of mean and standard deviation.
Question:
From a portfolio perspective, explain the normal distribution and its two moments of mean and standard deviation. Given that market returns are typically non-normal, provide an explanation of the higher orders of skewness and kurtosis. Use graphs to support answer
B (1): Assume a risk free rate of 6% prevails and there is a risky portfolio P available with an expected return of 14% and a standard deviation of 20%. Graph the capital allocation line the slope of the CAL
B (ii) Now assume that lending is conducted at the risk free rate of 6% but that borrowing is conducted at the higher rate of 7%. In this case graph the capital allocation line the slope information.
Explain how this differs from the CAL in part of this question.
Business Statistics In Practice
ISBN: 9780073401836
6th Edition
Authors: Bruce Bowerman, Richard O'Connell