Suppose that you can borrow or lend money at the risk-free rate Rf = 2.6%. The...

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Suppose that you can borrow or lend money at the risk-free rate Rf = 2.6%. The capital market line that starts at this risk-free rate and is tangent to the efficient frontier of risky assets has a slope of 0.8 and the standard deviation of the tangency portfolio is 16.6%. You've done your portfolio analysis and now you want to choose your optimal investment. You would like for your portfolio to have the standard deviation of 6%. What return can you expect to earn if you choose your optimal investment portfolio following the advice of the modern portfolio theory? Report your answer in decimal form rounded to 4 decimal places. Suppose that you can borrow or lend money at the risk-free rate Rf = 2.6%. The capital market line that starts at this risk-free rate and is tangent to the efficient frontier of risky assets has a slope of 0.8 and the standard deviation of the tangency portfolio is 16.6%. You've done your portfolio analysis and now you want to choose your optimal investment. You would like for your portfolio to have the standard deviation of 6%. What return can you expect to earn if you choose your optimal investment portfolio following the advice of the modern portfolio theory? Report your answer in decimal form rounded to 4 decimal places.

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Calculating Expected Return of Optimal Portfolio We can use th... View the full answer