You manage a risky portfolio with expected rate of return of 7% and standard deviation of 15%.
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You manage a risky portfolio with expected rate of return of 7% and standard deviation of
15%. The T-bill rate is 4%.
Your client chooses to invest 50% of a portfolio in your fund and 50% in a T-hill money market fund. What is the expected value and standard deviation of the rate of return on his portfolio?
Draw the CAL of your portfolio on an expected return-standard deviation diagram. What is the slope of the CAL? Show the position of your client on your fund's CAL.
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