Question: The expected return for the market is 12 percent, with a standard deviation of 21 percent. The expected risk-free rate is 8 percent. Information is

The expected return for the market is 12 percent, with a standard deviation of 21 percent. The expected risk-free rate is 8 percent. Information is available for five mutual funds, all assumed to be efficient:

Mutual Funds SD (%)

Affiliated ……………………….. 14

Omega ………………………….. 16

Ivy 21 Value Line Fund 25 New Horizons 30

a. Calculate the slope of the CML.

b. Calculate the expected return for each portfolio.

c. Rank the portfolios in increasing order of expected risk.

d. Do any of the portfolios have the same expected return as the market? Why?

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a CML slope 124 21 38 b Affiliated 4 38 14 93 Omega 4 38 16 ... View full answer

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