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Suppose that you have $1 million and the following two opportunities from which to construct a portfolio: Risk-free asset earning 10% per year. Risky asset
Suppose that you have $1 million and the following two opportunities from which to construct a portfolio:
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Risk-free asset earning 10% per year.
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Risky asset with expected return of 25% per year and standard deviation of 33%.
If you construct a portfolio with a standard deviation of 26%, what is its expected rate of return?
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