The expected return for the market is 12 percent, with a standard deviation of 21 percent. The

Question:

The expected return for the market is 12 percent, with a standard deviation of 21 percent. The expected risk-free rate is 8 percent. Information is available for five mutual funds, all assumed to be efficient:

Mutual Funds SD (%)

Affiliated ……………………….. 14

Omega ………………………….. 16

Ivy 21 Value Line Fund 25 New Horizons 30

a. Calculate the slope of the CML.

b. Calculate the expected return for each portfolio.

c. Rank the portfolios in increasing order of expected risk.

d. Do any of the portfolios have the same expected return as the market? Why?

Mutual Funds
Mutual funds are like a pool of funds gathered by different small investors that have simalar investment perspective about returns on their investments. These funds are managed by professional investment managers who act smartly on behalf of the... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...