Assume that you manage a risky portfolio with an expected rate of return of 17% and...
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. a. What is the slope of the CML?
Homework Answers
Slope of CML= Expected return- Risk Free rate/Standard deviation
Slope of CML= 13%- 7%/25%
Slope of CML= 6%/25%
Slope of CML=.24
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Assume that you manage a risky portfolio with an expected rate
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Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your risky portfolio includes the following investments in the given proportions: Stock A 27% Stock B 33% Stock C 40% Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an...
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