Data: RZ=14.5%; rf=2%; and Z=4%

1. Compute the expected rates of return and levels of risk for the Capital Allocation Line (CAL)

using values of (y=2)

2. in y=2 is leverage being used? What are the two outcomes of leverage? Answer in terms of risk and return

3. where y=2, what is the initial margin value if margin trading is used?