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You are considering investing in three assets. Asset A has an expected return of 15% and...

You are considering investing in three assets. Asset A has an expected return of 15% and standard deviation of 32%. Asset B has an expected return of 9% and standard deviation of 23%. Asset C is risk-free with an expected return of 5.5%. The correlation between A and B is 0.25. a) What is the expected return and standard deviation of the optimal risky portfolio? (2) b) Suppose your portfolio must yield an expected return of 12% and be efficient. That is, on the best feasible CAL. What is the standard deviation of your portfolio? (1) c) What is the proportion of your portfolio invested in A and B, respectively?

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jeff jeffy answered 1 year ago
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