Question: It is given to us that the expected return on the market portfolio is E( r M )=12%, and the standard deviation of the market

It is given to us that the expected return on the market portfolio is E(r_M)=12%, and the standard deviation of the market portfolio _M = 10%.

(Key-in your answers in decimal format and keep 4 decimal places to your answers.)

(a) Larry told you that by investing 70% his money in the market portfolio, and the rest in the risk-free asset, he can achieve an expected return of 9.9%, while being on the Capital Market Line (CML). What is the risk-free rate? What is the standard deviation of his portfolio? What is the price of risk?

Risk-free rate r_f: _________

Standard deviation of the portfolio: ___________

Price of risk: ______________

(b) Barb wants to achieve an expected return of 19% on the CML. What is the standard deviation of her portfolio? In what proportions should she invest in the market portfolio and the risk-free asset? (Keep 2 decimal places to your answers.)

Standard deviation of her portfolio: ____________

Proportation in market portfolio: _____________

Proportation in risk-free asset: _______________

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

It is given to us that the expected return on the market portfolio is E( r M )=12%, and the standard deviation of the market portfolio M = 10%. (Key-in your answers in decimal format and keep 4...

It is given to us that the expected return on the market portfolio is En-12%, and the standard deviation of the market portfolio -10%. (Keep 4 decimal places to all answers, e.g. xxx.1234.) (a) Larry...

Expected return on the market portfolio is 7%, the standard deviation of returns on the market portfolio is 10% and the risk-free rate is 2%. Which stocks are going to be on the buy-lists and which...

Please solve it fast ASAP with all requirements Question 1 Financial asset XYZ pays a single expected cash flow of $100 two years from today. You know the following information about this financial...

4. (5 points) Assume that the expected return on the market portfolio is 15% with standard deviation of 20%. The risk-free rate is r = 5%. You need to give financial advice to a client who is risk...

please step by step 4. (5 points) Assume that the expected return on the market portfolio is 15% with standard deviation of 20%. The risk-free rate is r You need to give financial advice to a client...

i am studying for an exam and It's crucial I understand so may you please write step by step? thanks 4. (5 points) Assume that the expected return on the market portfolio is 15% with standard...

I just need help with Part C please (the graph) 1. (24 points) Assume the capital asset pricing model assumptions are satisfied. The expected return on the market portfolio is 8%, the standard...

1 . For problems 1 and 2 , use the following data: risk - free rate is 1 . 5 % ; expected return of the market portfolio M is 9 . 6 9 % ; standard deviation of the market return is 2 0 % . Your...

Explain the differences between crowd funding and crowd source funding (CSF). Discuss the regulatory framework of crowd source funding (CSF) in Australia.

A security pays $195.00 in one year and $190.00 in two years. The yield on the security is 4.20% (implying a market price of $362.13). If the first payment is reinvested at a rate of 5.20%, what is...

Which of the following is not an example of an affirmative ( positive ) covenant? Question 3 Answer a . Requirement to furnish bondholders with a copy of the firm's annual account b . Requirement to...

Compare and contrast project initiation with project monitoring. How might the project charter developed by the initiation group help the monitoring group with regard to scope creep? Describe two...

If you exclude the city from the previous question from analysis, what sales rank does Arkansas fall to?

Which three states had the lowest sales volume for the two weeks of analysis?

Compare and contrast the stacked bar chart produced by Tableau Desktop with the one produced by Power BI Desktop. Which one is easier to interact with?