You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected

Question:

You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. Draw the CML and your fund's CAL on an expected return/standard deviation diagram.

a. What is the slope of the CML?

b. Characterize in one short paragraph the advantage of your fund over the passive fund.

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...