Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Investment science. please don't copy answer from other post, many thanks. (Capital market line) Assume that the expected rate of return on the market portfolio

Investment science. please don't copy answer from other post, many thanks.image text in transcribed

(Capital market line) Assume that the expected rate of return on the market portfolio is 8% and the rate of return on T-bills (the risk-free rate) is 2%. The standard deviation of the market is 30%. Assume that the market portfolio is efficient. (a) What is the equation of the capital market line? (b) (i) If an expected return of 10% is desired, what is the standard deviation of this position? (ii) If you have $3,000 to invest, how should you allocate it to achieve the above position? (c) If you invest $400 in the risk-free asset and $600 in the market portfolio, how much money should you expect to have at the end of the year

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions