Suppose that you have $1 million and the following two opportunities from which to construct a portfolio:

Question:

a. Risk-free asset earning 12% per year.

b. Risky asset with expected return of 30% per year and standard deviation of 40%.

If you construct a portfolio with a standard deviation of 30%, what is its expected rate of return?

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...