investment management practise

2. Suppose that the assumptions of the Single Index Model tal Ri= a+ B, RM+ei hold true. Suppose that the market index has an expected rate of return of RM 8% with a standard deviation of 5%. The risk-free rate of return is RF = 2%. Consider the five assets described below. B. Oei Asset 1 5% 1.5 25% Asset 2 0 0.8 5% Asset 3 -0.5 % 0.5 10% Asset 4 3% 1.3 15% Asset 5 2% 0.9 18% Rank the assets according to their desirability, from highest to lowest, assuming a. That the market index is not tradable b. That the market index is tradable. (50%) (50%) 2. Suppose that the assumptions of the Single Index Model tal Ri= a+ B, RM+ei hold true. Suppose that the market index has an expected rate of return of RM 8% with a standard deviation of 5%. The risk-free rate of return is RF = 2%. Consider the five assets described below. B. Oei Asset 1 5% 1.5 25% Asset 2 0 0.8 5% Asset 3 -0.5 % 0.5 10% Asset 4 3% 1.3 15% Asset 5 2% 0.9 18% Rank the assets according to their desirability, from highest to lowest, assuming a. That the market index is not tradable b. That the market index is tradable. (50%) (50%)