Question: Please show me the work and explanation using the formulas needed Consider the Capital Market Line. Suppose the expected return on the market portfolio is
Please show me the work and explanation using the formulas needed
Consider the Capital Market Line. Suppose the expected return on the market portfolio is 14%, the risk- free rate is 5%, and the standard deviation of the market portfolio is 27%.
A- If you place 50% of your funds in the market portfolio and the remainder in the risk-free asset,
the expected return and the standard deviation of the return on the portfolio are equal to ________ respectively.
a. 14%; 27%
b. 5%; 27%
c*. 9.5%; 13.5%
d. 11.75%; 20.25%
e. 18.5%; 40.5%
B- If you borrow 50% of the funds at the risk-free interest rate and invest the borrowed and all other funds in the risky portfolio, the expected return and the standard deviation of the return on the portfolio are equal to _____________ respectively.
a. 14%; 27%
b. 5%; 27%
c. 9.5%; 13.5%
d. 11.75%; 20.25%
e*. 18.5%; 40.5%
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