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 you would suggest to her? (5 points)
Based on your answer in part a, draw the Capital Allocation Line (CAL). (5 points)

Expert Solution

jeff jeffy answered 2 years ago

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

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

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Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rP)...

Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rP) = 12%, σP = 18%, rf = 3%. a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 6%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? (Do not round intermediate calculations. Round...

Consider the following information about a risky portfolio that you manage and risk-free asset: E (rp)...

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You have $100 to invest in a portfolio. The portfolio is composed of a risky asset...

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You own a portfolio equally invested in a risk-free asset and two stocks (If one of...

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

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