Assume that the expected rate of return on the market portfolio is 23% and the rate of return on T-bills (the risk-free rate) is 5%. The standard deviation of the market return is 25%. Assume that the market portfolio is efficient.

(Key-in your answers in decimal format and keep4 decimal places to your answers.)

What is the slope of the capital market line _____________

If an efficient asset has expected return of 17.6%, what is the standard deviation of this asset? If you have $5,000 to invest, how much should you allocate it to market portfolio and the risk-free respectively in order to achieve the above return?

Standard deviation: ____________

Allocation to market ($): ____________

Allocation to risk-free asset ($): __________

If you borrow $3,000 at the risk-free rate and invest $18,000 in the market portfolio, how much money should you expect to have at the end of the year

Expected value ($): ___________