Question: Using the information regarding risk aversion you gathered in Question 1 you decide to advise you clients to invest funds in the market portfolio and

Using the information regarding risk aversion you gathered in Question 1 you decide to advise you clients to invest funds in the market portfolio and the risk-free asset. You gather historical data on NYSE stocks (the market portfolio) and determine that the average return of stocks is 11.7% and that the risk premium is 8.1%. NOTE changes. The standard deviation of stocks is 20.0%. You analyze the risk and return possibilities of a 1-year investment in the stock market and the risk-free asset.

9. The current risk-free rate over past year has changed with FED policy and moved up from 0.5% to 2.0% and now up to 5.0%. This is the new intercept of the CML. Given the historical experience of stocks what is the slope of the CML (the Sharpe ratio history of the market)?

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