Question: You estimate that a passive portfolio ( for example the S&P 5 0 0 ) yields an expected return of 1 4 % with a

You estimate that a passive portfolio (for example the S&P 500) yields an expected return of 14% with a standard deviation of 28%. You manage an active portfolio with expected return of 18% with a standard deviation of 32%. The risk-free rate is 8%.(Note: problems 2-4 are problems 27-29 in BKM on page 182) Draw the CML and your funds' CAL on an expected return-standard deviation diagram. Calculate the slope of the CML. Characterize in one short paragraph the advantage of your fund over the passive fund.

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