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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:
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 8.3% 10.3 R 11.6% 14.4 5.9 S 4.0 T 12.0 18.2 6.5 8.5 a. For each portfolio, calculate the risk premium per unit of risk that you expect to receive ([E(R) - RFR]/o). Assume that the risk-free rate is 2.0 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 -Select- 9 has the -Select ratio of risk premium per unit of risk, of these five portfolios so it is most likely the market portfolio. Choose the correct CML graph. The correct graph is -Select- 9 d! A. Expected Rate of Fletum 0.15 0.1 R 0.05 RFR -0.08-0.08-0.04-0.02 0.02 0.04 0.06 D.OB D.1 0.12 0.14 0.16 0.10 Expected Risk Capital market Line B. Expected Rate of Retum 0.15 0:1 0.05 S RFR 0.08 0.08 0.04 0.02 0.02 0.04 0.06 D.OB D.1 0.12 0.14 0.16 0.18 Expected Risk 0.08 D.1B C. Capital market Line Expected Rate of Return 0.15- 01 0.05- S RFR -0.08-0.05-0.04-0.02 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 Expected Risk D. Capital market Line Expected Rate of Return 0.15 0.1 R 0.05 RFR -0.08-0.05-0.04 -0.02 0.02 0.04 0.06 D.OB 0.1 0.12 0.14 0.16 0.18 Expected Fisk
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