You are evaluating various investment opportunities currently available and you have calculated expected returns and standard deviations for five different well-diversified portfolios of risky assets:

Portfolio	Expected Return		Standard Deviation
Q	8.6	%	10.8	%
R	10.8		13.3
S	5.3		5.9
T	11.7		16.6
U	6.3		8.2

a. For each portfolio, calculate the risk premium per unit of risk that you expect to receive ([E(R) - RFR]/). Assume that the risk-free rate is 3.0 percent. Round your answers to four decimal places.

Q:

R:

S:

T:

U:

b. Using your computations in Part (a), explain which of these five portfolios is most likely to be the market portfolio. Round your answer to four decimal places.

Portfolio ___ has the _highest/lowest_ ratio of risk premium per unit of risk, ______ , of these five portfolios so it is most likely the market portfolio.

c. If you are only willing to make an investment with = 6.1%, is it possible for you to earn a return of 6.1 percent? Do not round intermediate calculations. Round your answer to one decimal place.

Expected portfolio return: %

It _is/is not_ possible to earn an expected return of 6.1% with a portfolio whose standard deviation is 6.1%.

d. What is the minimum level of risk that would be necessary for an investment to earn 6.1 percent? Do not round intermediate calculations. Round your answer to one decimal place.

%

What is the composition of the portfolio along the CML that will generate that expected return? Round your answers to four decimal places.

w_MKT:

w_{risk-free asset}:

e. Suppose you are now willing to make an investment with = 18.7%. What would be the investment proportions in the riskless asset and the market portfolio for this portfolio? Use a minus sign to enter negative values, if any. Round your answers to four decimal places.

w_MKT:

w_{risk-free asset}:

What is the expected return for this portfolio? Round your answer to one decimal place.

%