Question

What is the equation of Bo's capital allocation line?

Answer 1

Capital allocation line is the graph which plots the risk-return values of stocks and risk free assets; The X axis represents Standard deviation of stocks and Y axis represents Expected return of stocks;

The general equation of Capital allocation line is given below;

E(s) =Rf+ S*σ(s)

Where E(s)= expected return of stock ; Rf=risk free rate ; σ(s)= standard deviation of stock ; S=sharpe ratio/ slope

note: Since no other details of Bo's is given, please substitute the details in the equation given above;