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You are given the option of choosing between three well diversified portfolios to use as the optimal portfolio in a single index model. Information on
- You are given the option of choosing between three well diversified portfolios to use as the optimal portfolio in a single index model. Information on them is given below:
| Portfolio | Expected Return | Expected Standard Deviation |
| A | .1 | .05 |
| B | .12 | .07 |
| C | .14 | .08 |
- (20 points) If the risk-free rate is .04, which portfolio would you choose? Why?
- (20 points) How, if at all, does your answer change if the risk-free rate is .06? Explain.
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PFIN
Authors: Randall Billingsley , Lawrence J. Gitman, Michael D. Joehnk
6th Edition
1337117005,1337516694
