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Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp)=11%,p=15%,rf=5% a) (5 points) Your client wants to invest a
Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp)=11%,p=15%,rf=5% a) (5 points) Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her complete portfolio equal to 8%. What proportion should she invest in the risky portfolio? b) ( 3 points) What will be the standard deviation of the rate of return on her portfolio? c) (5 points) Draw the Capital Allocation Line (CAL) of your portfolio on an expected returnstandard deviation diagram. What is the slope of the CAL? Show the position of your client d) (4 points) You advise your client that she should select an optimal portfolio. Your client's on your fund's CAL. degree of risk aversion is A=3. What proportion of her wealth should be invested in your fund
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