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Consider the function below that describes the risk-return relation for a risky asset. [ R=ln (sigma) ] where ( R ) : return ( sigma:
Consider the function below that describes the risk-return relation for a risky asset. \\[ R=\\ln (\\sigma) \\] where \\( R \\) : return \\( \\sigma: \\) risk If the risk-free rate is 0.05 : a. Sketch the curve of the function. b. Express the excess return. c. Express the excess return per unit of risk. d. Compute the maximum excess return per unit of risk. (Note: \\( \\frac{d(\\ln (x))}{d x}=\\frac{1}{x} \\) and you might want to refresh on the quotient rule)
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