T120 Mid-Trimester Assessment: FIN201 UG-hvestment Management Page 11 of 12 (b) Brenda Box, an investor, holds...
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T120 Mid-Trimester Assessment: FIN201 UG-hvestment Management Page 11 of 12 (b) Brenda Box, an investor, holds the market portfolio, which has an expected retum of 13% per annumand a standard deviation of 18%. Brenda also has access to the risk-free asset which has a rate of retum of 5% per annum and a standard deviation of 0%. She may also borrow at the same risk-free rate. Brenda wishes to move to a portfolio which has a retum of 15% per annum, which will maximize her utility. (i) Using the above information, explain what Brenda could do to create a portfolio with a 15% per annum rate of retum. ANS. ANS. (ii) If Brenda creates this new portfolio, what will be its standard deviation? END OF ASSESSMENT PAPER T120 Mid-Trimester Assessment: FIN201 UG - Investment Management Page 12 of 12 T120 Mid-Trimester Assessment: FIN201 UG-hvestment Management Page 11 of 12 (b) Brenda Box, an investor, holds the market portfolio, which has an expected retum of 13% per annumand a standard deviation of 18%. Brenda also has access to the risk-free asset which has a rate of retum of 5% per annum and a standard deviation of 0%. She may also borrow at the same risk-free rate. Brenda wishes to move to a portfolio which has a retum of 15% per annum, which will maximize her utility. (i) Using the above information, explain what Brenda could do to create a portfolio with a 15% per annum rate of retum. ANS. ANS. (ii) If Brenda creates this new portfolio, what will be its standard deviation? END OF ASSESSMENT PAPER T120 Mid-Trimester Assessment: FIN201 UG - Investment Management Page 12 of 12
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