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Answer (ii) and (iii) is enough! Thanks! b. Mr. Miles is a first time investor and wants to build a portfolio using only U.S. Treasury
Answer (ii) and (iii) is enough! Thanks!
b. Mr. Miles is a first time investor and wants to build a portfolio using only U.S. Treasury bills and an index fund that closely tracks the S&P 500 Index. The Treasury bills have a return of 5%. The S&P 500 has a standard deviation of 20% and an expected return of 15%. i. What U.S. Treasury bills and S&P 500 Index should stand for if we want to apply our knowledge of the Capital Market Line (CML)? (4 marks) ii. Draw the Capital Market Line (CML) and mark the points where the investment in the market portfolio is 0 percent, 25 percent, and 100 percent. (8 marks) iii. Mr. Miles is also interested in determining the exact risk and return at each point mentioned in part (ii). Calculate the expected return and standard deviation of Mr. Miles' investment at each point. (6 marks)Step by Step Solution
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