In a universe with just two assets, a risky asset and a risk-free asset, what is...

In a universe with just two assets, a risky asset and a risk-free asset, what is the slope of the Capital Allocation Line if the Expected return of the risky asset is 6.22% and the standard deviation of the returns of the risky asset is 23.4%. The return on the risk-free asset is 3.21%

Solutions

Expert Solution

Dear student thankyou for using Chegg.

Please find the answer below.

Statement showing computation:

Slope of Capital allocation line= (Expected return- risk free rate)/standard deviation

Slope of Capital allocation line= (6.22-3.21)/23.4

Slope of Capital allocation line= 3.01/23.4= 0.1286

Slope of Capital allocation line= 0.1286

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

14. In a universe with just two assets, a risky asset and a risk-free asset, what...

14. In a universe with just two assets, a risky asset and a risk-free asset, what is the slope of the Capital Allocation Line if the Expected return of the risky asset is 6.22% and the standard deviation of the returns of the risky asset is 23.4%. The return on the risk-free asset is 3.21% Report 2 decimals. 17. An investment opportunity has 4 possible outcomes. The possible returns in each of these outcomes are -7.1%, 0.1%, 4.8% and 14.6%....

In a portfolio consisting of the risk free asset and/or a risky asset, what is the...

In a portfolio consisting of the risk free asset and/or a risky asset, what is the expected return and standard deviation if you borrow 25% of your net worth by selling short the risk free asset and invest the proceeds in the risky asset, given the following? Rm = .15 Rf = .05 σm = .2

Discuss the implications of combining a risk-free asset with a portfolio of risky assets.

You invest all your money into a risky asset and a risk-free asset. The risky asset...

You invest all your money into a risky asset and a risk-free asset. The risky asset has an expected return of 0.065 and a standard deviation of 0.25, the risk-free asset returns 0.025. What is the return on your combined portfolio if you invest 0.4 in the risky asset, and the remainder in the risk-free asset? Round your answer to the fourth decimal point.

Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock...

Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an expected return of 25% and a beta of 1.5. Stock J has an expected return of 20% and a beta of 0.8. The risk-free asset’s return is 5%. a. Calculate the expected returns and betas on portfolios with x% invested in Stock I and the rest invested in the risk-free asset, where x% = 0%, 50%, 100%, and 150%. b. ...

Q1) You have a portfolio of one risky asset and one risk-free asset. The risky asset...

Q1) You have a portfolio of one risky asset and one risk-free asset. The risky asset has an expected return of 20% and a variance of 16%. The T-bill rate (that is the risk-free rate) is 6%. Your client Mary is thinking of investing 75% of her portfolio in the risky asset and the remaining in a T-bill. If Mary wants to find a general equation for the expected return and risk of her portfolio what are the equations that...

Is it possible to build a risk-free portfolio using risky assets?

The risk-free asset has a return of 1.62%. The risky asset has a return of 8.82%...

The risk-free asset has a return of 1.62%. The risky asset has a return of 8.82% and has a variance of 8.82%. Karen has the following utility function: LaTeX: U=a\times\sqrt{r_{c\:}}-b\times\sigma_cU = a × r c − b × σ c, with a=1.3 and b=8.78. LaTeX: r_cr c and LaTeX: \sigma_cσ c denote the return and the risk of the combined portfolio. The optimal amount to be invested in the risky portfolio is 33.85% . (Note: this solution does not necessarily...

If the expected return on a risky asset is 13%, standard deviation is 25%, and the risk free asset 5%.

If the expected return on a risky asset is 13%, standard deviation is 25%, and the risk free asset 5%.Calculate the expected return , standard deviation, sharp ratio for the complete portfolio with y= .60

4. Suppose we have two risky assets, Stock I and Stock J, and a risk-free...

4. Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an expected return of 25% and a beta of 1.5. Stock J has an expected return of 20% and a beta of 0.8. The risk-free asset’s return is 5%. a. Calculate the expected returns and betas on portfolios with x% invested in Stock I and the rest invested in the risk-free asset, where x% = 0%, 50%, 100%, and...

Subjects