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The risky portfolio A consists of 1000 shares of BIT PLC and 4000 shares of DIMO PLC. Assume that BIT PLC has a share price
- The risky portfolio A consists of 1000 shares of BIT PLC and 4000 shares of DIMO PLC. Assume that BIT PLC has a share price of $6, an expected return of 18%, and a standard deviation of 22%. DIMO PLC has a share price of $4, an expected return of 14%, and a standard deviation of 20%. The correlation between the two is 0.6, and the risk-free rate of interest is 8%.
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- Graph the Capital Allocation Line derived from the risk-free asset and portfolio A. (Label all axes and points carefully).
- What fraction of your portfolio must you invest in A to have a portfolio standard deviation of 12%?
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Fundamentals Of Multinational Finance
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
1st Edition
0201844842, 978-0201844849
