Investment Management Inc (IMI) uses the capital market line to make asset allocation recommendations IMI derives the following forecasts Expected return on the market portfolio 12 Standard deviation on the market portfolio 20 Risk free rate 5 Samuel Johnson seeks IMIs advice for a portfolio asset ...

Johnson requests the portfolio standard deviation to equal one half ...

Investment Management Inc. (IMI) uses the capital market line to make asset allocation recommendations. IMI derives the

Question:

Investment Management Inc. (IMI) uses the capital market line to make asset allocation recommendations.
IMI derives the following forecasts:
• on the market 12%.
• Standard deviation on the market 20%.
• Risk-free rate: 5%.
Samuel Johnson seeks IMI’s advice for a asset allocation. Johnson informs IMI that he wants the standard deviation of the to equal half of the standard deviation for the market Using the capital market line, what can IMI provide subject to Johnson’s risk constraint?

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...