Question
Suppose there are only two tradable assets: S&P 500 and a T-Bill. The S&P 500 index has an expected return of 15% and a standard
Suppose there are only two tradable assets: S&P 500 and a T-Bill. The S&P 500 index has an expected return of 15% and a standard deviation of returns of 25%. The risk-free rate is 3%.
a) What is the slope of the Capital Allocation Line (CAL)? (this is equal to the Sharpe Ratio of your MVE)
b) What is the composition of a portfolio on the Capital Allocation Line that has an expected return of 20%? What is the standard deviation of this portfolio?
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Horngrens Financial and Managerial Accounting
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
5th edition
9780133851281, 013385129x, 9780134077321, 133866297, 133851281, 9780133851298, 134077326, 978-0133866292
