You have $1000 to invest. The risk free rate is 6%. The market portfolio has expected return of 15% and standard deviation of 20%.

Part a. What is the mean and standard deviation of your investment if you invest $500 in the risk-free asset and $500 in the market portfolio?

Part b. Your sister also has $1000 to invest, but she wants to borrow another $1000 in order to make investment of $2000 in the market portfolio M. What will be the mean and standard deviation of her portfolio's return?

Part c. Which portfolio is better? Yours or your sister's? D:

Consider a stock with an expected return of 6% and standard deviation of 15%. Suppose that the risk-free asset has a return of 1%.

What will be the average return and standard deviation of of a portfolio composed of 20% of the risk free aseet and 8-% of the stock?

CML WITH LEVERAGE Section a. Expected portfolio return Portfolio standard deviation Section b. Expected portfolio return Portfolio standard deviation \begin{tabular}{|l|r|} \hline Expected stock return & 6% \\ \hline Stock standard deviation & 15% \\ \hline Risk-free rate & 1% \\ \hline \end{tabular} Proportion of stock in portfolio Proportion of risk-free in portfolio Expected portfolio return Portfolio standard deviation