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Arizona state homework 8. Ben has a risky portfolio that is 70% invested in a stock portfolio (the stock portfolio has an expected return of
Arizona state homework 8. Ben has a risky portfolio that is 70% invested in a stock portfolio (the stock portfolio has an expected return of 14.0% and standard deviation of 28.0%) and 30% invested in a bond portfolio (the bond portfolio has an expected return of 6.0% and standard deviation of 12.0%). Ben's risky portfolio has an expected return of 11.60% and a standard deviation of 18.5%. The risk-free rate is 3.0%. Ben has some questions about his complete portfolio. Currently the weights of his complete portfolio are (62.50%, 37.50%). 6 pts a. Ben has a risk aversion parameter of 1.9. What should be the expected return and standard deviation of Ben's optimal complete portfolio? b. Draw a graph of the CAL. Label the axes. Plot the risk-free asset, Ben's risky portfolio, Ben's current complete portfolio and Ben's optimal complete portfolio you computed in part a). For the four points you plot on the graph identify numerically their coordinates. 8. Ben has a risky portfolio that is 70% invested in a stock portfolio (the stock portfolio has an expected return of 14.0% and standard deviation of 28.0%) and 30% invested in a bond portfolio (the bond portfolio has an expected return of 6.0% and standard deviation of 12.0%). Ben's risky portfolio has an expected return of 11.60% and a standard deviation of 18.5%. The risk-free rate is 3.0%. Ben has some questions about his complete portfolio. Currently the weights of his complete portfolio are (62.50%, 37.50%). 6 pts a. Ben has a risk aversion parameter of 1.9. What should be the expected return and standard deviation of Ben's optimal complete portfolio? b. Draw a graph of the CAL. Label the axes. Plot the risk-free asset, Ben's risky portfolio, Ben's current complete portfolio and Ben's optimal complete portfolio you computed in part a). For the four points you plot on the graph identify numerically their coordinates
Arizona state homework
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