Question
Mr. Efficient holds a portfolio that lies on the Capital Market Line (CML). The expected returnof his portfolio is 16.5% and its Sharpe ratio is
Mr. Efficient holds a portfolio that lies on the Capital Market Line (CML). The expected returnof his portfolio is 16.5% and its Sharpe ratio is 0.9.
(a) Assume Mr. Efficients portfolio has an expected standard deviation of 15%. Whatis the risk-free rate?
(b) Another portfolio has an expected return of 11% and a standard deviation of 10%. Could this be the tangency portfolio? Why or why not?
(c) Assume that the tangency portfolio has indeed a standard deviation of 10%. Whatis the weight of the tangency portfolio in Mr. Efficients portfolio? What is the weight of therisk-free asset?
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Sport Funding And Finance
Authors: Bob Stewart
2nd Edition
041583984X, 978-0415839846
