Question: You have been given the following data: States Probability 0.3 Bear Market -5% -3% 0.5 18% 10% Normal Market 50% 10% 0.2 Bull Nom Market
You have been given the following data: States Probability 0.3 Bear Market -5% -3% 0.5 18% 10% Normal Market 50% 10% 0.2 Bull Nom Market i. ii. If you will invest $100,000 in X and $50,000 in Y. Compute the expected return and standard deviation of the risky portfolio (3 Marks) Compute the expected return and the risk of a complete portfolio in which you combine equally between the risky portfolio and the risk-free asset. The risk-free rate of return is 6% (2 Marks) Explain the Capital Allocation Line (CAL) and compute its slope. (2 Marks) Hii
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