. Let (0%) for i=1,2,...,n be the volatilities and expected returns of n risky investments. The...
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. Let (0%) for i=1,2,...,n be the volatilities and expected returns of n risky investments. The expected return and volatility of the market portfolio are μM = 4% p.a. and OM= 18% p.a., respectively. The efficient frontier (for the risky investments) is given by the equation ²=562²_2.24+0.0324. Note that this equation is satisfied when 0 = 0.18 and u= 0.04 (the market portfolio). a. Find the risk-free rate of interest with annual compounding. b. Find the equation for the Capital Market Line (an equation of the form u= ad+b). (Round the coefficients to 6 decimals.) c. Let P be the portfolio consisting of 10% of the risk-free investment and 90% of the market portfolio. Find the expected return and volatility. . Let (0%) for i=1,2,...,n be the volatilities and expected returns of n risky investments. The expected return and volatility of the market portfolio are μM = 4% p.a. and OM= 18% p.a., respectively. The efficient frontier (for the risky investments) is given by the equation ²=562²_2.24+0.0324. Note that this equation is satisfied when 0 = 0.18 and u= 0.04 (the market portfolio). a. Find the risk-free rate of interest with annual compounding. b. Find the equation for the Capital Market Line (an equation of the form u= ad+b). (Round the coefficients to 6 decimals.) c. Let P be the portfolio consisting of 10% of the risk-free investment and 90% of the market portfolio. Find the expected return and volatility.
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a Find the riskfree rate of interest with annual compounding The riskfree rate of interest is the intercept of the Capital Market Line CML The CML is ... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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