Every investor in the capital asset pricing model owns a combination of the market portfolio and a riskless asset Assume that the standard deviation of the market portfolio is 30 and that the expected return on the portfolio is 15 What proportion of the following investors wealth would you suggest ...

a Invest everything in the riskless asset b Solve 015 w03 to get w 05 invest 50 in e ...

Every investor in the capital asset pricing model owns a combination of the market portfolio and a

Question:

Every investor in the owns a combination of the market and a riskless asset. Assume that the standard deviation of the market is 30% and that the on the is 15%. What proportion of the following investor’s wealth would you suggest investing in the market and what proportion in the riskless asset?
(The riskless asset has an of 5%)
a. An investor who desires a with no standard deviation.
b. An investor who desires a with a standard deviation of 15%.
c. An investor who desires a with a standard deviation of 30%.
d. An investor who desires a with a standard deviation of 45%.
e. An investor who desires a with an of 12%.
Capital Asset Pricing Model
The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. The CAPM is a model for pricing an individual security or portfolio. For individual securities, we make use of the security market line (SML) and its... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... 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...