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Question # 3 : Asset Allocation [ 2 1 Points ] Suppose that a portfolio consisting of risky stocks has an expected return of E
Question #: Asset Allocation Points
Suppose that a portfolio consisting of risky stocks has an expected return of with a standard deviation Suppose that the riskfree asset treasury bills has an expected return of
Suppose that y is the proportion of the overall portfolio that is invested in the risky asset.
a Calculate the expected return of the overall complete portfolio that has a mix of the risky asset and the riskfree asset, Hint: Your answer will be a function of y Points
b Calculate the standard deviation of the overall complete portfolio that has a mix of the risky asset and the riskfree asset. Hint: Your answer will be a function of y Points
c Graph the capital allocation line CAL for the overall portfolio. Be sure to properly label the x and y axis. Clearly identify the intercept on the graph. Points
d Calculate the Sharpe ratio of the risky portfolio. Round your answer to decimal places. Points
e Calculate the expected return and standard deviation of the overall complete portfolio if the investor has chosen a weight of Round your answer to decimal places. Points
f Suppose that an investor has a riskaversion parameter of Calculate the fraction of this investor's portfolio that will be held in risky portfolio y Round your answer to decimal places. Points
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