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OF Corporation (OFC) uses the Capital allocation Line ( CAL ) to make asset allocation recommendations. OFC derives the following forecasts: Expected Return of CRYPT
OF Corporation (OFC) uses the Capital allocation Line ( CAL ) to make asset allocation recommendations. OFC derives the following forecasts:
Expected Return of CRYPT portfolio = 12%
Standard deviation of CRPT portfolio = 20%
Risk-free rate = 5%
Mr.ABC seeks OFC's advice for a portfolio asset allocation. He informs OFC that he wants the standard deviation of his portfolio to equal half of the standard deviation of CRYPT portfolio. Using the CAL, what expected return can OFC provide subject to Mr.ABC's risk constraint?
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