Question
1.a) Briefly describe how the Efficient Frontier and the Capital Allocation Line (CAL) are determined. Include all steps and procedures. 1.b) The CAL has the
1.a) Briefly describe how the Efficient Frontier and the Capital Allocation Line (CAL) are determined. Include all steps and procedures.
1.b) The CAL has the following parameters: Risk-free rate is 3 percent, return on the optimal risky portfolio is 12 percent, with a standard deviation (SD) of 20 percent. What is your expected return if you limit your risk to a Standard Deviation of 10 percent?
1.c) How do you achieve a 35 percent return using the parameters above? Explain and show precisely how you would achieve the return and also calculate the standard deviation of the portfolio.
This is all the info I've been given. I need to draw the efficient frontier and capital allocation line and describe both.
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